SHANDONG CHENMING PAPER HOLDINGS LIMITED
Annual Report 2020
March 2021
I Important Notice, Table of Contents and Definitions
The board of directors (the “Board”), the supervisory committee (the “Supervisory Committee”) and the directors (the
“Directors”), supervisors (the “Supervisors”) and senior management (the “Senior Management”) of the Company hereby
warrant the truthfulness, accuracy and completeness of the contents of the annual report, guarantee that there are no false
representations, misleading statements or material omissions contained in this annual report, and are jointly and severally
responsible for the liabilities of the Company.
Chen Hongguo, head of the Company, Dong Lianming, head in charge of accounting and Zhang Bo, head of the accounting
department (Accounting Officer), declare that they warrant the truthfulness, accuracy and completeness of the financial report
in the annual report.
All Directors have attended the board meeting to review this report.
The Company is exposed to various risk factors such as macro-economic fluctuation, state policies and regulations and
competition in the industry. Investor should be aware of investment risks. For further details, please refer to the risk factors
likely to be faced and the measures to be taken to address them as set out in the outlook on the future development of the
Company in Discussion and Analysis of Operations.
The proposed profit distribution plan of the Company was considered and passed by the Board:
The audited consolidated net profit attributable to equity holders of the Company for 2020 prepared in accordance with
Accounting Standards for Business Enterprises by the Company amounted to RMB1,712,029,078.52. When deducting the
interest on Perpetual Bonds of RMB171,776,438.36 for 2020 and the fixed dividend on Preference Shares of RMB214,425,000.00,
the distributable profit realised for 2020 amounted to RMB1,325,827,640.16.
In accordance with the requirements of the Articles of Association and the Prospectus of Non-public Issuance of Preference
Shares, based on the total ordinary share capital of 2,984,208,200 shares and the simulated ordinary shares converted from the
second and third tranches of the Preference Shares using a conversion ratio of 1 share valued at RMB3.82 as at the end of 2020
of 589,005,236 shares, a cash dividend of RMB1.85 (tax inclusive) per 10 shares will be distributed to ordinary shareholders,
a cash dividend of RMB1.85 (tax inclusive) per 10 simulated ordinary shares converted from the Preference Shares will be
distributed to holders of the second and third tranches of the Preference Shares. No bonus shares will be issued and there is
no increase of share capital from reserves. A cash dividend of RMB552,078,517.00 will be distributed to holders of ordinary
shares and a variable cash dividend of RMB108,965,968.66 will be distributed to holders of the second and third tranches of
the Preference Shares. In other words, a cash dividend of RMB4.84 (tax inclusive) per Preference Share with a nominal value of
RMB100 each will be distributed to holders of the second and third tranches of the Preference Shares. If the total share capital of
the Company changes before the date of the equity registration for the implementation of the equity distribution, it is proposed to
maintain the same total distribution and adjust the distribution ratio per share accordingly.
2020 ANNUAL REPORT 1
I Important Notice, Table of Contents and Definitions
Table of contents
I Important Notice, Table of Contents and Definitions ........................................................................................ 2
II Company Profile and Key Financial Indicators ................................................................................................. 5
III Chairman’s Report ............................................................................................................................................ 10
IV Business Overview ............................................................................................................................................ 12
V Discussion and Analysis of Operations ............................................................................................................. 20
VI Directors’ Report ............................................................................................................................................... 45
VII Material Matters ................................................................................................................................................ 55
VIII Changes in Share Capital and Shareholders .................................................................................................... 90
IX Preference Shares ............................................................................................................................................. 98
X Directors, Supervisors and Senior Management and Staff ............................................................................... 102
XI Corporate Governance ...................................................................................................................................... 114
XII Corporate Bonds ............................................................................................................................................... 137
XIII Financial Report ................................................................................................................................................ 142
XIV Documents Available for Inspection.................................................................................................................. 320
2 SHANDONG CHENMING PAPER HOLDINGS LIMITED
I Important Notice, Table of Contents and Definitions
Definitions
Item means Definition
Company, Group, Chenming Group or means Shandong Chenming Paper Holdings Limited and its subsidiaries
Chenming Paper
Parent Company or Shouguang Headquarters means Shandong Chenming Paper Holdings Limited
Chenming Holdings means Chenming Holdings Company Limited
Shenzhen Stock Exchange means Shenzhen Stock Exchange
Stock Exchange means The Stock Exchange of Hong Kong Limited
CSRC means China Securities Regulatory Commission
Shandong CSRC means Shandong branch of China Securities Regulatory Commission
Zhanjiang Chenming means Zhanjiang Chenming Pulp & Paper Co., Ltd.
Jiangxi Chenming means Jiangxi Chenming Paper Co., Ltd.
Wuhan Chenming means Wuhan Chenming Hanyang Paper Holdings Co., Ltd.
Shanghai Chenming means Shanghai Chenming Industry Co., Ltd.
Huanggang Chenming means Huanggang Chenming Pulp & Paper Co., Ltd.
Chenming (HK) means Chenming (HK) Limited
Jilin Chenming means Jilin Chenming Paper Co., Ltd.
Shouguang Meilun means Shouguang Meilun Paper Co., Ltd.
Chenming Sales Company means Shandong Chenming Paper Sales Company Limited
Finance Company means Shandong Chenming Group Finance Co., Ltd.
Chenming Leasing means Shandong Chenming Financial Leasing Co., Ltd. and its
subsidiaries
Chenming GDR Fund means Weifang Chenming Growth Driver Replacement Equity Investment
Fund Partnership (Limited Partnership)
Chenrong Fund means Weifang Chenrong Growth Driver Replacement Equity Investment
Fund Partnership (Limited Partnership)
Chenchuang Fund means Weifang Chenchuang Equity Investment Fund Partnership (Limited
Partnership
2020 ANNUAL REPORT 3
I Important Notice, Table of Contents and Definitions
Item means Definition
Changjiang Chenming Equity Investment Fund means Hubei Changjiang Chenming Huanggang Equity Investment Fund
Partnership (Limited Partnership)
Shanghai Herui means Shanghai Herui Investment Co., Ltd.
Corporate Bonds means 17 Chenming Bond 01 and 18 Chenming Bond 01
Preference Shares means Chenming You 01, Chenming You 02 and Chenming You 03
Perpetual Bonds means 17 Lu Chenming MTN001 and 17 Lu Chenming MTN002
the reporting period or the year means The period from 1 January 2020 to 31 December 2020
the beginning of the year or the period means 1 January 2020
the end of the year or the period means 31 December 2020
the prior year means The period from 1 January 2019 to 31 December 2019
4 SHANDONG CHENMING PAPER HOLDINGS LIMITED
II Company Profile and Key Financial Indicators
I. Company profile
Stock abbreviation Stock code 000488
B 200488
01 140003
02 140004
03 140005
Stock exchanges on which the shares are listed Shenzhen Stock Exchange
Stock abbreviation Chenming Paper Stock code 01812
Stock exchanges on which the shares are listed The Stock Exchange of Hong Kong Limited
Legal name in Chinese of the Company
Legal short name in Chinese of the Company
Legal name in English of the Company (if any) SHANDONG CHENMING PAPER HOLDINGS LIMITED
Legal short name in English of the Company (if any) SCPH
Legal representative of the Company Chen Hongguo
Registered address No. 595 Shengcheng Road, Shouguang City, Shandong Province
Postal code of registered address 262700
Office address No.2199 Nongsheng East Road, Shouguang City, Shandong Province
Postal code of office address 262705
Website of the Company http://www.chenmingpaper.com
Email address chenmmingpaper@163.com
II. Contact persons and contact methods
Secretary to the Board Hong Kong Company Secretary
Name Yuan Xikun Chu Hon Leung
Correspondence Address No. 2199 Nongsheng East Road, Shouguang 22nd Floor, World Wide House, Central, Hong
City, Shandong Province Kong
Telephone (86)-0536-2158008 +852-21629600
Facsimile (86)-0536-2158977 +852-25010028
Email address chenmmingpaper@163.com liamchu@li-partners.com
III. Information disclosure and places for inspection
Designated media for information disclosure China Securities Journal, Shanghai Securities News, Securities
Times, Securities Daily and Hong Kong Commercial Daily
Designated websites for the publication of the annual Domestic: http://www.cinifo.com.cn; Overseas: http://www.hkex.
report as approved by CSRC com.hk
Places for inspection of the Company’s annual report Securities investment department of the Company
IV. Change in registration
Organisation registration code 913700006135889860
Change of principal activities since its listing (if any) No
Change of the controlling shareholder (if any) No
2020 ANNUAL REPORT 5
II Company Profile and Key Financial Indicators
V. Other relevant information
CPAs engaged by the Company
Name of CPAs Grant Thornton (Special General Partnership)
CPAs’ Office Address Floor 11, Building No. 4, HuaChuang GuanLi Center, 219 Shunhai Road,
Lixia District, Jinan
Name of the Signing Certified Public Accountants Liu Jian and Jiang Lei
Sponsors engaged by the Company to continuously perform its supervisory function during the reporting period
Applicable √ Not applicable
Financial advisors engaged by the Company to continuously perform its supervisory function during the reporting period
Applicable √ Not applicable
VI. Major accounting data and financial indicators
Retrospective adjustment to or restatement of the accounting data for prior years by the Company
Yes √ No
Increase/decrease
for the year as
compared to the
2020 2019 prior year 2018
Revenue (RMB) 30,736,517,996.90 30,395,434,073.35 1.12% 28,875,756,163.56
Net profit attributable to shareholders of the
Company (RMB) 1,712,029,078.52 1,656,566,584.88 3.35% 2,509,828,858.47
Net profit after extraordinary gains or losses
attributable to shareholders 1,119,103,808.75 702,329,086.29 59.34% 1,953,699,849.75
Net cash flows from operating activities (RMB) 11,259,802,676.28 12,232,707,222.94 -7.95% 14,099,701,887.04
Basic earnings per share (RMB per share) 0.36 0.33 9.09% 0.51
Diluted earnings per share (RMB per share) 0.36 0.33 9.09% 0.51
Rate of return on weighted average net assets 5.84% 5.57% Increased by 0.27 8.51%
percentage point
Increase/decrease
as at the end
of the year
As at the As at the compared to the As at the
end of 2020 end of 2019 end of the prior year end of 2018
Total assets (RMB) 91,575,457,828.62 97,958,909,935.15 -6.52% 105,318,734,827.82
Net assets attributable to shareholders
of the Company (RMB) 24,276,968,789.00 25,169,743,863.75 -3.55% 25,048,731,454.79
6 SHANDONG CHENMING PAPER HOLDINGS LIMITED
II Company Profile and Key Financial Indicators
Data specification: The net profit attributable to shareholders of the Company does not exclude the effect of the interest
payment deferred and accumulated to subsequent periods for Perpetual Bonds under other equity instruments and the
effect of the dividends on Preference Shares under other equity instruments that have been considered and approved for
distribution. When calculating financial indicators such as earnings per share and rate of return on weighted average net
assets, the interest on Perpetual Bonds of RMB171,776,438.36, the dividends on Preference Shares of RMB387,101,073.42
declared to be distributed and the cash dividends of RMB116,679,908.80 attributable to the shareholders of restricted
shares expected to be unlocked in the future among the dividends distributed during the reporting period are deducted.
VII. Differences in accounting data under domestic and overseas accounting standards
1. Differences between the net profit and net assets disclosed in accordance with international
accounting standards and China accounting standards in the financial report
Applicable √ Not applicable
There was no difference between the net profit and net assets disclosed in accordance with international accounting
standards and China accounting standards in the financial report during the reporting period.
2. Differences between the net profit and net assets disclosed in accordance with overseas accounting
standards and China accounting standards in the financial report
Applicable √ Not applicable
There was no difference between the net profit and net assets disclosed in accordance with overseas accounting
standards and China accounting standards in the financial report during the reporting period.
VIII. Key Financial Indicators by Quarter
Unit: RMB
Q1 Q2 Q3 Q4
Revenue 6,085,376,805.28 7,514,428,960.58 8,473,304,915.35 8,663,407,315.69
Net profit attributable to shareholders of
the Company 202,790,856.25 313,535,847.23 560,227,575.14 635,474,799.90
Net profit after extraordinary gains or
losses attributable to shareholders of
the Company 143,993,251.71 -76,111,135.48 463,336,879.91 587,884,812.61
Net cash flows from operating activities 655,581,522.20 1,671,452,262.48 4,941,816,336.88 3,990,952,554.72
Whether the above indicators or their aggregated amounts have any material difference with the respective amounts as
disclosed in the quarterly report or interim report
Yes √ No
2020 ANNUAL REPORT 7
II Company Profile and Key Financial Indicators
IX. Five-year financial summary under paragraph 19 of appendix 16 of the Hong Kong Listing
Rules
Unit: RMB’ 0,000
For the year ended 31 December
2020 2019 2018 2017 2016
Before After Before After
adjustment adjustment adjustment adjustment
Revenue 3,073,652 3,039,543 2,887,576 2,985,174 2,947,245 2,290,711 2,256,692
Profit before tax 217,227 204,848 320,632 453,648 453,648 258,317 258,317
Tax 26,606 29,518 64,158 77,752 77,752 56,056 62,597
Profit for the current period attributable to
shareholders of the Company 171,203 165,657 250,983 376,933 376,933 206,399 199,858
Minority interests 19,418 9,673 5,491 -1,036 -1,036 -4,138 -4,138
Basic earnings per share (RMB/share) 0.36 0.33 0.51 1.13 1.13 0.99 0.95
Rate of return on weighted average
net assets (%) 5.84% 5.57% 8.51% 15.80% 15.80% 9.59% 9.23%
Unit: RMB’ 0,000
For the year ended 31 December
2020 2019 2018 2017 2016
Before After Before After
adjustment adjustment adjustment adjustment
Total assets 9,157,546 9,795,891 10,531,873 10,562,510 10,562,510 8,228,535 8,228,535
Total liabilities 6,577,519 7,161,914 7,944,704 7,535,092 7,535,092 5,972,050 5,972,050
Minority interests 152,329 117,003 82,296 249,565 249,565 34,605 34,605
Equity attributable to shareholders of the
Company 2,427,697 2,516,974 2,504,873 2,777,853 2,777,853 2,221,881 2,221,881
Net current assets (liabilities) -1,516,398 -774,633 -1,344,718 -783,090 -783,090 -1,094,182 -1,094,182
Total assets less current liabilities 4,052,922 4,526,014 4,390,405 4,837,646 4,837,646 3,557,671 3,557,671
8 SHANDONG CHENMING PAPER HOLDINGS LIMITED
II Company Profile and Key Financial Indicators
X. Items and amounts of extraordinary gains or losses
√ Applicable Not applicable
Unit: RMB
Item Amount for 2020 Amount for 2019 Amount for 2018 Explanation
Profit or loss from disposal of non-current assets (including
write-off of provision for assets impairment) -51,477,216.37 135,669,108.82 17,149,722.72
Government grants (except for the government grants closely
related to the normal operation of the company and granted
constantly at a fixed amount or quantity in accordance with
a certain standard based on state policies) accounted for in
profit or loss for the current period 943,720,129.34 623,277,014.49 535,691,291.26
Gain arising from investment costs for acquisition of
subsidiaries, associates and joint ventures by the corporation
being less than its share of fair value of identifiable net assets
of the investees on acquisition 364,597,001.77
Profit or loss from debt restructuring -14,942,498.74 -55,792,548.82
Except for effective hedging business conducted in the ordinary
course of business of the Company, gain or loss arising from
the change in fair value of financial assets held for trading,
derivative financial assets, financial liabilities held for trading
and derivative financial liabilities, as well as investment gains
from disposal of financial assets held for trading, derivative
financial assets, financial liabilities held for trading, derivative
financial liabilities and other debt investments 21,166,216.02 46,445,653.55 61,750,000.00
Consumable biological assets subsequently measured at fair
value -13,329,852.55 19,752,911.94 -21,464,400.65
Other non-operating income and expenses other than the above
items 8,582,997.62 24,876,982.31 23,291,720.22
Loss on abnormal work stoppage -24,567,901.71
Less: Effect of income tax 120,949,832.54 131,148,729.27 52,960,460.82
Effect of minority interests (after tax) 155,276,771.30 33,934,072.32 7,328,864.01
Total 592,925,269.77 954,237,498.59 556,129,008.72 –
Notes for the Company’s extraordinary gain or loss items as defined in the Explanatory Announcement on Information
Disclosure for Companies Offering Their Securities to the Public No.1 – Extraordinary Gains or Losses and the extraordinary
gain or loss items as illustrated in the Explanatory Announcement on Information Disclosure for Companies Offering Their
Securities to the Public No.1 – Extraordinary Gains or Losses defined as its recurring gain or loss items
Applicable √ Not applicable
No extraordinary gain or loss items as defined or illustrated in the Explanatory Announcement on Information Disclosure for
Companies Offering Their Securities to the Public No. 1 – Extraordinary Gains or Losses were defined by the Company as
its recurring gain or loss items during the reporting period.
2020 ANNUAL REPORT 9
III Chairman’s Report
Dear shareholders,
I am pleased to present to all shareholders the report of the Company for the financial year ended 31 December 2020. On behalf
of the Board, I express my sincere gratitude to all shareholders for their concern and support rendered to the Company.
During the reporting period, in the face of the unexpected COVID-19 and the complicated and ever-changing international trade
environment, the Company resolutely implemented the national decision-making and deployment on epidemic prevention and
control, actively coordinated the work of epidemic prevention and control, resumed work and production, supported the epidemic
areas, and actively fulfilled its social responsibilities, which fully demonstrated the responsibilities and the sense of responsibility
of a national paper making enterprise. Under the leadership of the Board and the management of the Company, and the
guidance of the policy of “efficient management, structural adjustment, market development and risk control”, the Group focused
on the development of its principal activities, i.e. pulp production and paper making), carried forward the spirit of craftsman,
concentrated efforts, strengthened its conviction and overcame difficulties to ensure that neither the epidemic prevention and
control nor the production and operation were neglected. In the second half of 2020, with the effective control of COVID-19 in
China, the recovery of domestic demand, the eradication of foreign waste, a stricter ban on plastics and other favourable policies,
the prices of paper products such as white cardboard and the upstream pulp rose steadily, and the paper making industry
entered an ascending channel. The prices of the Company’s major paper types rose several times, and the advantages of pulp
and paper integration stood out. The core competitiveness of the Company was further enhanced. During the year, not only did
the Company complete all its tasks, but it also achieved all its goals with flying colours.
I. Results of Operations
In 2020, the Company completed the production of machine-made paper of 5.77 million tonnes and achieved sales of 5.61
million tonnes, representing a year-on-year increase of 15.17% and 6.86%, respectively. The Company achieved revenue of
RMB30,737 million, representing a year-on-year increase of 1.12%. Total profit and net profit attributable to equity holders
of the Company were RMB2,172 million and RMB1,712 million respectively, up by 6.04% and 3.35% year on year. The
Company’s total assets amounted to RMB91,575 million.
II. Corporate Governance
During the reporting period, the Company regulated its operation under the requirements of the Companies Law, the
Securities Law, the Code of Corporate Governance for Listed Companies, the Guidelines of the Shenzhen Stock Exchange
for Standardised Operation, the Rules Governing Listing of Stocks on Shenzhen Stock Exchange, the Rules Governing
the Listing of Securities on The Stock Exchange of Hong Kong Limited and the related regulations of the China Securities
Regulatory Commission. The Company kept on improving and optimising its legal person governance structure and
regulating its operation in practice. During the reporting period, the Company held 14 board meetings, 8 Supervisory
Committee meetings and 8 general meetings. The operation of the “three meetings” was efficient and compliant. The Board
and I considered the status of the Company’s corporate governance was substantially in compliance with the provisions
and requirements of the regulatory documents such as the Code of Corporate Governance for Listed Companies. At the
same time, the Board strived to regulate the operation of the Company. The Company improved its corporate governance
system in a timely manner and successively amended the Registration Management System for Insiders, External
Guarantee Decision System and Securities Investment Management System to further enhance the standard operation level
of corporate governance.
Strict enforcement of relevant internal control systems has promoted a regulated operation and healthy development of the
Company, thus protecting the legitimate rights and interests of the investors. The overall status of corporate governance
is in compliance with the requirements of the China Securities Regulatory Commission. As the Company’s development
strives forward, its regulated operation and internal control will continue to improve.
10 SHANDONG CHENMING PAPER HOLDINGS LIMITED
III Chairman’s Report
III. Dividend Distribution
The Company has always placed much emphasis on the benefits of and returns to its shareholders. The audited
consolidated net profit attributable to equity holders of the Company for 2020 prepared in accordance with Accounting
Standards for Business Enterprises by the Company amounted to RMB1,712,029,078.52. When deducting the interest on
Perpetual Bonds of RMB171,776,438.36 and the fixed dividend on Preference Shares of RMB214,425,000.00 for 2020, the
distributable profit realised for 2020 amounted to RMB1,325,827,640.16. In accordance with the requirements of the Articles
of Association and the Prospectus of Non-public Issuance of Preference Shares, the proposed profit distribution plan of the
Company for 2020 is as follows:
Based on the total ordinary share capital of 2,984,208,200 shares and the second and third tranches of the simulated
ordinary shares converted from the Preference Shares using a conversion ratio of 1 share valued at RMB3.82 as at the end
of 2020 of 589,005,236 shares, a cash dividend of RMB1.85 (tax inclusive) per 10 shares will be distributed to holders of
ordinary shares; a cash dividend of RMB1.85 (tax inclusive) per 10 simulated ordinary shares converted from the Preference
Shares will be distributed to holders of the second and third tranches of the Preference Shares. No bonus shares will be
issued and there is no increase of share capital from reserves. A cash dividend of RMB552,078,517.00 will be distributed to
holders of ordinary shares and a variable cash dividend of RMB108,965,968.66 will be distributed to holders of the second
and third tranches of the Preference Shares. In other words, a cash dividend of RMB4.84 (tax inclusive) per Preference
Share with a nominal value of RMB100 each will be distributed to holders of the second and third tranches of the Preference
Shares. If the total share capital of the Company changes before the date of the equity registration for the implementation
of the equity distribution, it is proposed to maintain the same total distribution and adjust the distribution ratio per share
accordingly.
IV. Future Development
Success goes to the one who is determined to pursue the long and rough road. As the beginning year of the 14th Five-
Year Plan, 2021 will also see opportunities and challenges. This year, the Company will shoulder the responsibility of
“revitalising the national paper making industry, persistently deepen and focus on the development of its principal activities;
adhere to the general keynote of a green, low carbon, recycling and sustainable development, regard environmental
protection engineering as the “Life Project” of its corporate development, comprehensively implement clean production,
energy conservation, emission reduction and resource recycling, fulfil social responsibilities, and realise an all-win situation
for economic benefits, social benefits and ecological benefits. Adhering to the theme of scientific development, and
concentrating on improving quality and efficiency, the Company will comprehensively enhance its corporate management
and operation quality. Adhering to the pulp and paper integrated development strategy, the Company will focus on the
construction of Hubei Huanggang production base in central China, form the pattern comprising three production bases
with Shouguang in the north, Huanggang in the middle and Zhanjiang in the south, enhance the synergy effect, strive to
create a new situation of high-quality corporate development, and consolidate its leading position in the paper making
industry, thus forging ahead to become the most competitive paper making enterprise in the world!
On behalf of the Board, I would like to take this opportunity to express our heartfelt gratitude to the support and trust of all
investors, customers, business partners of various circles and the general public. I also would like to express our sincere
thanks to all Directors, Supervisors, the management and staff members of the Company, who put in a lot of mental and
physical hard work in the past year. We are looking forward to working with you, aiming to build a bright future for Chenming
Paper and provide good results as returns to our shareholders and society!
Chen Hongguo
Chairman
25 March 2021
2020 ANNUAL REPORT 11
IV Business Overview
I. Principal activities of the Company during the Reporting Period
(i) Principal activities of the Company during the reporting period
The Company is a large conglomerate principally engaged in pulp production and paper making with synergistic
development in finance, forestry, logistics and construction materials. Its key indicators in respect of business and
economic efficiency have been in a leading position in the industry in China for over 20 consecutive years. The
Company has been on the Fortune 500 China list for 11 years. The Company focuses on its principal activities, i.e.
pulp production and paper making. The machine-made paper business is the major source of revenue and profit of
the Company. During the reporting period, there was no significant change in the principal activities of the Company.
1. Business overview
The Company has committed itself to implementing a pulp and paper integration strategy. It takes the lead in
laying out the entire industrial chain, with 6 production bases in Shandong, Guangdong, Hubei, Jiangxi, Jilin
and other places, with an annual pulp and paper production capacity of more than 11 million tonnes. It is the
only large-scale pulp and paper integrated company in China that achieves a balance between pulp and paper
production. The Company implements an innovation-driven strategy and has introduced world-leading pulp
production and paper making technology and equipment. Its product series include high-end offset paper, white
paper board, coated paper, light weight coated paper, household paper, electrostatic copy paper and thermal
paper, with each major product ranking among the highest in terms of market share in China.
The Company focuses on product and technology research and development, has scientific research institutions
including the national enterprise technology centre, the post-doctoral working station, the state certified CNAS
pulp and paper testing centre, Shandong Pulp and Paper Making Laboratory as well as the Guangdong Pulp
and Paper Production Technology Research Center and has obtained 303 national patents including 25 patents
for invention, with 7 products selected as national new products. The Company has obtained 15 science and
technology progress awards above the provincial level and undertaken five national science and technology
projects and 63 provincial technological innovation projects. The Company has pioneered to obtain the ISO9001
quality certification, ISO14001 environmental protection certification and FSC-COC certification among its
industry peers.
12 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IV Business Overview
I. Principal activities of the Company during the Reporting Period (Cont’d)
(i) Principal activities of the Company during the reporting period (Cont’d)
2. Main products
Culture paper
Major BIYUNTIAN, CLOUDY MIRROR, and CLOUDY LEOPARD all-wood
brands pulp offset paper; “CLOUDY LION” and “CLOUDY CRANE” offset
paper; and “CEDAR” and “GREEN PINE” light weight paper.
Range of Printing publications, textbooks, magazines, covers, illustrations,
application notebooks, test papers, teaching materials, reference books, etc.
Coated paper
Major “SNOW SHARK” and “EAGLE” one-sided coated paper;
brands “SNOW SHARK”, “EAGLE”, “RABBIT” and “SNOW SWALLOW”
doublesided coated paper, and “EAGLE”, “RABBIT” and “SNOW
SWALLOW” matte coated paper.
Range of High quality printing, such as high-grade picture albums, picture,
application magazines and so on. Promotional materials such as interior
pages of high-end books, wall calendars, posters and so on.
Upscale tobacco package paper, adhesive sticker, shopping bags,
slipcases, envelopes, gift wrapping and so on.
White cardboard
Major White cardboard and ivory cardboard of ZITAN series and POPLAR
brands series, super high bulk cardboard, Chenming cigarette cardboard,
fluid inclusion cardboard, and base paper for mugs.
Range of High-end gift boxes, cosmetics boxes, tags, shopping bags,
application publicity pamphlets, high-end postcards; cigarette package printing
of medium and high quality; milk package, beverage package,
disposable paper cups, milk tea cups, and noodle bowls.
2020 ANNUAL REPORT 13
IV Business Overview
I. Principal activities of the Company during the Reporting Period (Cont’d)
(i) Principal activities of the Company during the reporting period (Cont’d)
2. Main products (Cont’d)
Light weight coated paper
Major Jinzhou high-grade light weight coated paper and refined light
brands weight coated paper
Range of Printing advertisements, high-end publications, magazine inner
application pages, and picture albums; suitable for highspeed sheetfed press
or high-speed rotary speed press.
Industrial paper
Major High-grade yellow antisticking base paper, ordinary yellow/white
brands anti-sticking base paper, bill base paper, cast coated base paper,
PE paper, stripping base paper, and white kraft paper
Range of Anti-stick base paper is mainly used for producing the paper
application base of stripping paper or anti-sticking base paper. Cast coated
base paper is suitable for producing adhesive paper or playcard
compound paper after coating.
Electrostatic copy paper
Major GOLDEN MINGYANG and GOLDEN CHENMING copy paper,
brands BOYA and BIYUNTIAN copy paper, MINGYANG, LUCKY CLOUDS,
BOYANG, and SHANYIN copy paper, and GONGHAO, and
TIANJIAN copy paper
Range of Printing and copying business documents, training materials, and
application writing.
Household paper
Major Toilet paper, facial tissue, pocket tissue, napkin, paper towels,
brands “XINGZHILIAN”, “FOREST LOVE”, and “BEIYING”
Range of Daily toilet supplies; used in restaurants and other catering
application industries, and used in public toilets in hotels, guesthouses, and
office buildings, and also suitable for home and other environment.
14 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IV Business Overview
I. Principal activities of the Company during the Reporting Period (Cont’d)
(i) Principal activities of the Company during the reporting period (Cont’d)
3. Operation model
(1) Purchase model
The Company has established a comprehensive procurement information system, fully realised machine
control management, and optimised the authorisation approval process. It strives to promote the
construction of procurement information systems, establishes an enterprise network bidding platform,
improves the contract management module, optimises the SAP three-level authority approval process,
and effectively establishes a standardised procurement management system. Meanwhile, the Company
cooperates with financial institutions and third parties in the supply chain financial business to enhance
business reputation, establishes synergistic relationships, leverages core enterprise scale advantages,
and improves the competitiveness of the supply chain; strengthens source procurement, implements the
80/20 procurement concept, introduces a competitive mechanism, improves supply quality, and reduces
procurement costs; actively uses futures tools to optimise raw material pricing, prevents price risks, and
realises futures pricing benefits.
(2) Production model
The Company has committed itself to implementing a pulp and paper integration strategy. The Company
always adheres to the concept of “placing green development and environmental protection as its
priority”. Several supporting projects have been built, for instance, alkali recovery system, middle water
treatment system and middle water reuse system. Clean production has been actively promoted, and
energy conservation and emission reduction have been carried out vigorously. The Company is building
a resource-saving and environmentally friendly model enterprise. It is innovating an integrated use of
resources and a circular industrial development mode, and an “ecological chain” featuring resources,
products and recycled resources has been established. Its production volume is determined based on the
sales, and its production is arranged scientifically. The product mix is being optimised, and its inventories
are under strict control. The core competitiveness of the Company is further enhanced thanks to the
increased beneficial results brought by the new project that has gone into operation.
(3) Marketing model
The Company has a relatively mature sales network, and has set up specialised sales companies
responsible for the development of domestic and overseas markets, product sales, and formulation
of sales policies. The sales companies’ management systems are divided into product lines, product
companies, management areas, and branches to achieve matrix management. The sales companies
are divided into product companies of cultural paper series, coated paper series and household paper
series according to product line. Each product company has its administrative district. A regional general
manager is responsible for his administrative district, under which branch companies are set up. The chief
representatives of the branch companies have full authority to deal with branch business.
The Company has implemented a three-level scheduling mechanism. Branch companies, administrative
districts, and sales companies schedule task indicators daily to ensure the effective implementation of the
plans. Meanwhile, by perfecting our information systems and optimising business procedures, realising
IT-based management, the Company is improving its marketing management.
2020 ANNUAL REPORT 15
IV Business Overview
I. Principal activities of the Company during the Reporting Period (Cont’d)
(i) Principal activities of the Company during the reporting period (Cont’d)
3. Operation model (Cont’d)
(4) R&D Mode
The Company is market-oriented, and innovation is it driving force. Its investment in R&D and
its development of new products have been taken to a higher level to maintain a strong ability in
technological innovation. The Company has many scientific research institutions, for instance, the national
enterprise technology centre, the post-doctoral working station, the state certified CNAS pulp and paper
testing centre, Shandong Pulp and Paper Making Engineering Lab and the Guangdong Pulp and Paper
Production Technology Research Centre. The Company also works hard on the following aspects:
carrying out academic research with colleges and universities and R&D institutions such as Qilu University
of Technology, Qingdao University of Science and Technology, Tianjin University of Science and
Technology, and Institute of Chemical Industry of Forest Products of the Chinese Academy of Forestry,
building a contingent of high-quality talents with hands-on experience in innovation, accelerating the
industrialisation of new and high technologies, optimising product mix and improving the competitiveness
of its products in the market.
(ii) The situation of the industry where the Company operated and its position in the industry during the
reporting period
The paper making industry is one of the basic industries of the national economy. The paper making industry has the
typical characteristics of large-scale industrial production, such as continuous and efficient operation, and significant
economies of scale. The paper making industry is also vitally interrelated with people’s daily life. Not only is the paper
making industry the provider of basic goods and materials, but it also makes a lot of important materials related to
packaging, construction, chemical industry, electronics, energy, transportation, national security and other fields. The
paper making industry plays an irreplaceable role in the national economy. Affected by the supply-side reform, the
development of paper making industry has evolved from an extensive form to an intensive form. The increase in the
societal demands, the publishing of environmental protection policies, the continuous advances in technology and the
changes in the supply of resources have resulted in an accelerating reduction of the production capacity of low-end
products, the increasing concentration ratio of the industry and an improving industrial pattern.
Affected by the outbreak of COVID-19 in 2020, the ever-changing pattern of trade and other factors, the global
economy slumped, and the external environment became complicated and difficult. In the face of difficulties, the
control and prevention of COVID-19 and every aspect of economic and societal development were carried out
efficiently on a national level. All decision-making and deployment were implemented with a determined attitude. The
resumption of work and production were progressing steadily. The overall national economy was looking up, and the
prices of paper products and the upstream pulp rose steadily. The implementation of the ban on plastics, the ban
on importing waste and other policies brought a new scope for development to the paper making industry. Safety,
stability and economic efficiency became a new issue in the industry. The major development trend of the paper
making industry consisted of the further expansion of the industrial chain of paper making and the integration of pulp
and paper.
As a leading player in the paper making industry of China, the Company has implemented the strategy of innovative
operation, quickened its pace in growth driver replacement and led the way in full industry chain operation, and has
emerged as the only paper making enterprise in China to achieve capacity balance between pulp production and
paper making. Currently, the Company has the annual pulp and paper production capacity of over 11 million tonnes,
tops the industry in its paper product variety and ranks among the best in China in terms of the market share of its
major products. In 2020, the Company was once again listed in Top 500 Enterprises in China with the highest rank
among paper making enterprises, which demonstrated the strength in the Company’s development as it continued to
lead the growth of the industry.
16 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IV Business Overview
II. Material Changes of Major Assets
1. Material Changes of Major Assets
Major assets Description
Fixed assets During the reporting period, the pulping project and biomass power generation
project of Huanggang Chenming were reclassified as assets.
Construction in progress During the reporting period, the pulping project and biomass power generation
project of Huanggang Chenming were reclassified as assets.
Financial leasing assets During the reporting period, the Company continuously reduced the scale of the
financial leasing business, with net recovery of RMB3,600 million.
2. Major Assets Overseas
Applicable √ Not applicable
III. Analysis of Core Competitiveness
As a leading player in the paper making industry and a top 500 enterprise in China, after innovation and development for
more than 60 years, the Company has created own brand and nurtured its core competitiveness. By quickening the pace
in growth driver replacement and focusing on the main activities of pulp production and paper making, the Company has
formed the following advantages:
1. Advantages of pulp and paper integration
The official promulgation of the “ban on importing waste” and the improvement of relevant environmental protection
standards have further expanded the supply gap of wood pulp, and put forward new requirements for the safety and
stability of the industrial supply chain. The Company has unwaveringly implemented a pulp and paper integration
strategy. At present, its major production bases located in Shouguang, Zhanjiang, and Huanggang are equipped with
chemical pulp production lines, with total production capacity of wood pulp of over 4.30 million tonnes. It is the only
modern large-scale paper making company that basically realises wood pulp self-sufficiency in China. A complete
supply chain not only creates cost advantage for the Company, but also safeguards the safety, stability and quality of
upstream raw materials, and renders strong support for the Company to maintain its long-term competitiveness.
2. Scale advantages
The paper making industry is a typical capital-intensive and technology-intensive industry that follows the laws of
economies of scale. The Company is a leading player in the paper making industry in China. Its large-scale production
bases can be found in the major markets in Southern, Central, Northern, and Northeast China, with annual pulp and
paper production capacity of over 11 million tonnes, which have obvious economies of scale. Meanwhile, leveraging
the self-built international logistics centre and supporting railway dedicated lines and docks, the Company offers
comprehensive logistics services such as unitised transportation, bonded warehousing, transfer and storage at
stations and terminals. Through building an industrial ecosystem, the Company covers the whole business chain from
production to sales and achieved a scientific reduction in costs and distinguished scale merit.
2020 ANNUAL REPORT 17
IV Business Overview
III. Analysis of Core Competitiveness (Cont’d)
3. Product advantages
The Company is an enterprise that offers the widest product range in the paper making industry. The product
series include high-end offset paper, white paper board, coated paper, lightweight coated paper, household paper,
electrostatic copy paper, thermal paper, etc., with each major product ranking among the best in terms of market
share, among which the market share of cultural paper ranks first, and the market share of white cardboard and
coated paper ranks second. Over the years, the Company has attached great importance to technology research
and development, introduced the most advanced pulping and paper making technology and equipment, refined its
products and promoted dynamic upgrade of products by persisting in technological innovation and work process
optimisation, so as to continuously enhance the value of the brand of Chenming and improve brand benefits.
4. Industry layout advantages
Centring on the pulp and paper integration strategy, the Company has integrated resources and established its
production bases in the core target market to achieve coordinated development. Currently, the Company has six
production bases in Shandong, Guangdong, Hubei, Jiangxi, Jilin and other places. With all products sold at close
distances, the Company overcomes the transportation radius restriction. The swift and efficient delivery services
drastically reduce production costs and improve market radiating capacity of its products.
5. Advantages in technical equipment
”One cannot make brick without straw.” The Company highly values the introduction and upgrades of technical
equipment and boasts the largest and most advanced pulping and paper making production line in the world. The
Company’s major production equipment has been imported from internationally renowned manufacturers, including
Metso and Valmet of Finland, Voith of Germany, Andritz of Austria, etc. and reached the advanced international level.
For the moment, the Company has three paper machines with a paper width of more than 11 metres, which ensures
production efficiency and product quality. While making full use of international resources, the Company combines
product characteristics and actual needs to improve technology and technical processes, refine operations, transform
and optimise the pulp system’s degassing technology, wet end chemical technology, intelligent sheet lateral control
technology, coating preparation technology and other technical processes, thereby significantly improving the overall
efficiency.
6. Advantages in research and innovation
The Company, Zhanjiang Chenming, Shouguang Meilun, Jiangxi Chenming, Jilin Chenming, Huanggang Chenming
and Wuhan Chenming are high and new technology enterprises. Supported by the national enterprise technology
centre and the post-doctoral working station, in recent year, the Company has vigorously implemented innovation
promotion strategy, actively carried out in-depth industry-university-research cooperation with various prestigious
domestic universities and research institutes, put more and more efforts in technical innovation and scientific research
and development to develop new products with high technology contents and high added value as well as proprietary
technologies. As of the date of this report, the Company has obtained 303 national patents including 25 patents
for invention, 7 products selected as national new products, 15 science and technology progress awards above
the provincial level and undertaken five national science and technology projects and 63 provincial technological
innovation projects.
18 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IV Business Overview
III. Analysis of Core Competitiveness (Cont’d)
7. Team management advantages
With a reasonable and balanced professional structure, the Company has an experienced and stable core
management team, including high-end talents specialised in production, technology, sales, finance, laws, etc. In the
course of business operations, the stable core team has developed an internal corporate culture that ties in with the
Company’s development, summarised management experience with industry characteristics, and formed a team
advantage combining management and culture. At the same time, the Company has paid attention to the construction
of a talent reserve cultivation mechanism. With advanced business concepts and enormous development space,
the Company has attracted an array of high-calibre professionals and improved the level of talent pool. During the
reporting period, the Company optimised its mid- and long-term incentive mechanism, implemented an equity
incentive plan, and granted a total of 79.6 million restricted A-shares to 111 participants, which further stimulated the
creativity of the management team.
8. Advantages in environmental governance capacity
The Company has actively upheld the concept of “lucid waters and lush mountains are invaluable assets”, adhered
to the development idea of “placing green development and environmental protection as its priority”, unswervingly
followed the path of green development, and always regarded environmental protection as the “life project” to fully
implement clean production, energy conservation, emission reduction, and resource recycling, and earnestly shoulder
the corporate responsibility of environmental protection. The Company was awarded the honorary title of “2020
Environmental and Social Responsibility Enterprise”.
In recent years, the Company and its subsidiaries have constructed the pollution treatment facilities including the
alkali recovery system, middle water treatment system, middle water reuse system, white water recovery system and
black liquor comprehensive utilisation system. The environmental indicators of the Company rank high in the country
and in the world. At present, the Company adopts the world’s most advanced “ultrafiltration membrane+reverse
osmosis membrane” technology to complete the reclaimed water recycling membrane treatment project, which is
the largest middle water reuse project in the domestic paper industry. The reclaimed water recycle rate reaches more
than 75%. The reclaimed water quality meets drinking water standards, which can save fresh water every day 170,000
cubic meters.
2020 ANNUAL REPORT 19
V Discussion and Analysis of Operations
I. Overview
In 2020, the unexpected COVID-19 epidemic posed unprecedented shock to the global economy and increased the
downward pressure of the economy. Under the leadership of the Central Committee of the Communist Party of China,
China adhered to the general principle of seeking progress while maintaining stability, carried out epidemic prevention
and control and promoted economic development in a coordinated manner. With the continuous implementation of the
“six stability” and “six guarantees” tasks, domestic economy embraced steady resuscitation, and China became the only
country among the world’s major economies that achieved positive growth. As one of the important basic raw material
industries in China, the output and total profit of the paper making and paper product industry exhibited a trend of “turning
a negative into a positive, accelerating quarter by quarter”. Reeled from the epidemic in the first quarter during this reporting
period, the paper making industry was confronted with problems such as insufficient raw materials, delays in production
resumption and return to work, difficulties in logistics and delivery, decline in foreign trade, and insufficient market demand.
According to the National Bureau of Statistics, the output of machine-made paper and paper board in China decreased by
12.4% year on year, the total profit of industrial enterprises above designated size in the paper making and paper product
industry fell by 5.5% year on year. Since entering the second quarter, with the gradual strengthening of epidemic prevention
and control achievements, enterprises resumed work and production in an orderly manner. Thanks to the combined effects
of favourable policies such as the “ban on importing waste” and a stricter ban on plastics, market demand gradually picked
up, which stimulated a price rise of pulp and machine-made paper and improved prosperity of the paper making industry.
The major indicators changed from negative to positive and recorded growth against the overall downtrend. According
to the data from the National Bureau of Statistics, from January to December 2020, the national output of machine-made
paper and paper board was 127,006,300 tonnes, a record high since the founding of the People’s Republic of China.
The Company seized opportunities during crisis and sought stability in changes. During the reporting period, the Company,
as a leading player in the paper making industry in China, took strict control over the epidemic during the critical period of
epidemic prevention and control, carried out production resumption and return to work in an orderly manner, and stabilised
production and product quality. As the prevention and control of the epidemic bore fruits, market demand increased with a
higher pulp price. The Company’s major types of paper saw a price rise. The advantages of the pulp and paper integration
became more apparent with further enhanced profitability and successful fulfilment of various mission goals.
In 2020, the Company produced 5.77 million tonnes machine-made paper with sales of 5.61 million tonnes, representing
a year-on-year increase of 15.17% and 6.86% respectively. The Company recorded revenue of RMB30,737 million,
representing a year-on-year increase of 1.12%. Total profit and net profit attributable to equity holders of the Company
amounted to RMB2,172 million and RMB1,712 million respectively, representing a year-on-year increase of 6.04% and
3.35%. The operation and management results were mainly reflected in the following aspects:
(i) Achieving objectives of production capacity and efficiency, strategic optimisation and upgrading
In recent years, the Company continued to focus on the development of the principal business of pulping and paper
making. It successively invested in the 500,000-tonne cultural paper renovation project of Shouguang headquarters,
the 510,000-tonne high-end cultural paper project of Shouguang Meilun, the 1 million-tonne chemical pulp project of
Shouguang Meilun and 600,000-tonne of chemical wood pulp project of Huanggang Chenming. The Company’s pulp
and paper production capacity reached more than 11 million tonnes, becoming the only pulping and paper making
enterprise in China with a balanced pulp and paper production capacity. During the reporting period, as the pulp price
continued to rise, the Company’s advantages of low costs became prominent. New projects achieved the objectives
of production capacity and efficiency and recorded year-on-year growth of total profit.
20 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Discussion and Analysis of Operations
I. Overview (Cont’d)
(ii) Satisfying performance brought by innovative sales
In 2020, the COVID-19 epidemic brought a severe impact on sales work. In face of challenges, all sales personnel
actively strengthened marketing and promotion, assessed the current situation, seized the opportunity generated
by improved market sentiment and continued to increase prices, so as to achieve increases in both production and
sales. The sales volume of machine-made paper was 5.61 million tonnes, representing an increase of 360,000 tonnes
over last year. Firstly, we strengthened channel development and customer management. As a result, the number of
contracted customers increased significantly, and the market construction has been steadily improved. Secondly,
we gave full play to the advantages of the production base layout and increased sales at close distances. Thirdly, we
improved credit management, increased prepayments and strictly control business risks. Fourthly, we insisted on
structural adjustments, actively developed new products, increased sales of products with greater profit margin, and
strengthened competitive advantages.
(iii) Significant effects of supply chain management
During the reporting period, the management of the supply chain management centre was improved. The centre
strove for favourable policies, and the direct procurement from sources was taken to a higher level. The highlights
of our unparalleled results are as follows: 1. the amount of funds used was lowered by improving plan management,
regulating and sharing materials and selling on consignment. 2. National policies were researched on and strived
for. The Company was approved as “The Experimental Unit for the Regulatory Reform of the Processing Trade of
Enterprise Groups”. The Company and relevant import and export trade companies were approved to enjoy the tax
payment guarantee policies provided by the Finance Company of Chenming, leading to a lower cost of customs
clearance and quicker clearance than ever before. 3. The management of suppliers was further improved. We
explored new sources vigorously. Its cooperation with customers, the stability of the supply of raw materials and the
quality of raw materials were taken to a higher level.
(iv) Improving financial management and capital structure
During the reporting period, even though being confronted with harsh economic conditions, the Company improved
its financial management steadily. Various measures were adopted to optimise our debt and capital structure, leading
to a better financial conditions. 1. By enhancing capital management, lowering the balance of bonds and reducing our
debt and lease in a sustained way, the Company withdrew capital with a net value of RMB3,600 billion. Risks were
under effective control, and financial security was ensured. 2. Promoting setting up a financial information system and
a capital management platform, realising a comprehensive improvement of the overall arrangement, standardisation
and financial management of the Group’s financial business. 3. The policies benefiting enterprises, the scientific tax
planning, improved analysis on the trend of exchange rates and other measures resulted in a lower cost of funds and
a better financial position.
2020 ANNUAL REPORT 21
V Discussion and Analysis of Operations
I. Overview (Cont’d)
(v) Improving production management and exploring our potentials for a higher efficiency
During the reporting period, our production system adhered to the guiding principles and goals of the Company.
Our production management was enhanced. Our production was sped up for a high production volume. We also
explored our potentials for a higher efficiency. The Company produce 5.77 million tonne machine-made paper in
2020, representing a year-on-year increase of 0.76 million tonnes. 1. We carried out standard practice vigorously to
ensure that our paper making machines can operate in best conditions, aiming to increase production and efficiency. 2.
Upholding the operation philosophy of “pulp and paper integration”. Maximising the production of self-produced pulp
by increasing the production of paper making machines. 3. Producing products with high added value by adjusting
product mix. Optimising the proportion of pulp to other materials to lower production costs. Our volume of production
is determined on sales, and our production is arranged scientifically. We manage our inventory vigorously. Measures
in relation to saving water and reducing pollutants discharges were adopted. The purpose of all of these actions is to
explore our potentials and increase efficiency.
(vi) Strict corporate management producing initial success
In 2020, the Company’s management centre improved its basic management to conform to a series of requirements,
and a certain amount of effect was produced. The details are as follows:
1. Improving and streamlining our institutions and enhancing our implementation. The Group’s overall management
institutions were streamlined to make them simple and easy to use. We have developed 160 new procedures,
and the number of existing procedures is over 1,200. Certain parts of these procedures are monitored by a
mechanically controlled early warning system, leading to a higher operational efficiency. We obeyed our rules
and regulations in a stricter manner. Problems were solved immediately once they were discovered. Weekly
examinations and appraisals were conducted on essential works, improving the quality of our works effectively.
2. Improving our incentive mechanism and strengthening our team building. Our check-up system was organised
comprehensively, and our medium-term and long-term incentive mechanism was improved. The 2020
Restricted A Shares Incentive Plan was implemented, thus, members of our team were motivated effectively.
Everyone’s enthusiasm was aroused by taking up a job through competition among cadres, appraising through
democratic discussion, choosing excellent employees and other activities. We improved the quality of our
training and trained our own talents by building an online learning platform and an operational classroom and
conducting training with special topic.
22 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Discussion and Analysis of Operations
II. Analysis of principal operations
1. Overview
Please see “I. Overview” under “Discussion and Analysis of Operations” for relevant information.
2. Revenue and cost
(1) Components of revenue
Unit: RMB
2020 2019
Amount % of revenue Amount % of revenue Increase/decrease
Total revenue 30,736,517,996.90 100% 30,395,434,073.35 100% 1.12%
By industry
Machine-made paper 26,799,197,492.54 87.19% 25,911,568,864.47 85.25% 3.43%
Financial leasing 935,121,026.20 3.04% 1,815,459,714.28 5.97% -48.49%
Construction materials 419,138,839.41 1.36% 311,264,909.38 1.02% 34.66%
Electricity and steam 195,367,954.91 0.64% 143,725,243.14 0.47% 35.93%
Chemicals 144,274,657.39 0.47% 126,550,115.28 0.42% 14.01%
Others 2,243,418,026.45 7.30% 2,086,865,226.80 6.87% 7.50%
By product
White paper board 7,900,414,595.22 25.70% 6,908,899,578.15 22.73% 14.35%
Duplex press paper 6,880,399,009.21 22.39% 7,728,877,039.07 25.43% -10.98%
Coated paper 4,134,523,188.76 13.45% 3,779,487,348.44 12.43% 9.39%
Electrostatic paper 4,052,403,877.82 13.18% 3,270,064,358.54 10.76% 23.92%
Anti-sticking raw paper 1,118,932,774.91 3.64% 1,238,578,315.18 4.07% -9.66%
Household paper 531,378,922.70 1.73% 620,993,038.46 2.04% -14.43%
Other machine-made
paper 2,181,145,123.92 7.10% 2,364,669,186.64 7.78% -7.76%
Financial leasing 935,121,026.20 3.04% 1,815,459,714.28 5.97% -48.49%
Construction materials 419,138,839.41 1.36% 311,264,909.38 1.02% 34.66%
Electricity and steam 195,367,954.91 0.64% 143,725,243.14 0.47% 35.93%
Chemicals 144,274,657.39 0.47% 126,550,115.28 0.42% 14.01%
Others 2,243,418,026.45 7.30% 2,086,865,226.80 6.87% 7.50%
By geographical
segment
Mainland China 27,683,360,047.76 90.07% 26,788,134,394.76 88.13% 3.34%
Other countries and
regions 3,053,157,949.14 9.93% 3,607,299,678.59 11.87% -15.36%
2020 ANNUAL REPORT 23
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
2. Revenue and cost (Cont’d)
(2) Industries, products or regions accounting for over 10% of revenue or operating profit of the Company
√ Applicable Not applicable
Unit: RMB
Increase/decrease Increase/decrease Increase/decrease
of revenue as of operating costs of gross profit
compared to the as compared to the margin as compared
corresponding corresponding to the corresponding
period of the period of the period of the
Revenue Operating costs Gross profit margin prior year prior year prior year
By industry
Machine-made
paper 26,799,197,492.54 21,227,455,753.49 20.79% 3.43% 3.94% -0.39%
Financial leasing 935,121,026.20 127,620,095.42 86.35% -48.49% 6.41% -7.04%
By product
White paper board 7,900,414,595.22 5,764,493,788.34 27.04% 14.35% -4.69% 14.57%
Duplex press paper 6,880,399,009.21 5,658,261,879.44 17.76% -10.98% -5.85% -4.48%
Coated paper 4,134,523,188.76 3,253,634,912.22 21.31% 9.39% 13.16% -2.62%
Electrostatic paper 4,052,403,877.82 3,196,464,794.41 21.12% 23.92% 32.27% -4.98%
Anti-sticking raw
paper 1,118,932,774.91 868,748,128.10 22.36% -9.66% -2.21% -5.91%
Financial leasing 935,121,026.20 127,620,095.42 86.35% -48.49% 6.41% -7.04%
By geographical
segment
Mainland China 27,683,360,047.76 21,069,825,079.51 23.89% 3.34% 8.21% -3.42%
Other countries
and regions 3,053,157,949.14 2,575,769,106.70 15.64% -15.36% -21.45% 6.54%
Under the circumstances that the statistics specification for the Company’s principal operations data
experienced adjustment in the reporting period, the principal activity data upon adjustment of the statistics
specification as at the end of the reporting period in the latest year
Applicable √ Not applicable
24 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
2. Revenue and cost (Cont’d)
(3) Whether revenue from sales in kind is higher than revenue from services
√ Yes No
Increase/
By industry Item Unit 2020 2019 decrease
Machine-made paper Sales ’ 0,000 tonnes 561 525 6.86%
Production output ’ 0,000 tonnes 577 501 15.17%
Inventories ’ 0,000 tonnes 40 24 66.67%
Explanation on why the related data varied by more than 30%
√ Applicable Not applicable
As at the end of 2020, the inventories of machine-made paper increased by 66.67% from 240,000 tonnes to
400,000 tonnes as at the end of 2019, primarily due to lower sales as compared to production output due to the
COVID-19 epidemic during the reporting period.
(4) Performance of material sales contracts of the Company during the reporting period
Applicable √ Not applicable
2020 ANNUAL REPORT 25
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
2. Revenue and cost (Cont’d)
(5) Composition of operating costs
By industry
Unit: RMB
2020 2019
By industry Item Amount % of operating costs Amount % of operating costs Increase/decrease
Machine-made paper Raw materials 12,830,708,837.34 60.44% 11,895,067,318.85 58.24% 7.87%
Chemicals 2,571,910,928.88 12.12% 2,919,986,264.98 14.30% -11.92%
Energy and power 2,278,028,439.77 10.73% 2,258,151,625.63 11.06% 0.88%
Shipping fee 1,108,102,345.78 5.22% 968,334,036.25 4.74% 14.43%
Depreciation 1,024,679,469.64 4.83% 998,944,171.58 4.89% 2.58%
Labour costs 273,064,171.97 1.29% 302,162,995.36 1.48% -9.63%
Other production costs 1,140,961,560.11 5.37% 1,080,852,932.00 5.29% 5.56%
Subtotal 21,227,455,753.49 100.00% 20,423,499,344.65 100.00% 3.94%
Power and steam Raw materials 100,417,013.28 76.99% 93,231,639.91 81.42% 7.71%
Depreciation 11,986,604.72 9.19% 8,188,723.61 7.15% 46.38%
Labour costs 5,042,260.92 3.87% 3,266,996.70 2.85% 54.34%
Energy and power 5,424,201.15 4.16% 3,133,240.96 2.74% 73.12%
Chemicals 197,996.81 0.15% 201,122.01 0.18% -1.55%
Other production costs 7,367,419.47 5.65% 6,485,517.59 5.66% 13.60%
Subtotal 130,435,496.35 100.00% 114,507,240.78 100.00% 13.91%
Construction materials Raw materials 253,136,606.53 70.56% 186,642,183.80 73.31% 35.63%
Energy and power 40,584,938.35 11.31% 22,421,006.56 8.81% 81.01%
Labour costs 22,635,978.10 6.31% 15,055,767.95 5.91% 50.35%
Depreciation 10,376,987.54 2.89% 7,047,835.66 2.77% 47.24%
Shipping fee 9,368,706.78 2.61% 2,284,676.48 0.90% 310.07%
Other production costs 22,626,450.43 6.31% 21,130,132.76 8.30% 7.08%
Subtotal 358,729,667.72 100.00% 254,581,603.21 100.00% 40.91%
(6) Change of scope of consolidation during the reporting period
√ Yes No
During the reporting period, the scope of consolidation had 8 newly established subsidiaries, namely Chenming
(Overseas) Co., Ltd., Chenming (Singapore) Co., Ltd., Qingdao Chenming Import and Export Trade Co., Ltd., Hainan
Chenming Technology Co., Ltd., Hubei Changjiang Chenming Huanggang Equity Investment Fund Partnership
(Limited Partnership), Hubei Huanggang Chenming Equity Investment Fund Management Co., Ltd., Shandong
Dingkun Asset Management Partnership (Limited Partnership) and Huanggang Chenming Paper Technology Co.,
Ltd. During the reporting period, a subsidiary was acquired not within the definition of business, namely Shanghai
Herui Investment Co., Ltd., and a subsidiary, Kunshan Tuoan Plastic Products Co., Ltd. was acquired by the Group.
During the reporting period, 3 companies were reduced from the scope of consolidation. A subsidiary, Shandong
Chenming Paper Group (Fuyu) Sales Co., Ltd. was absorbed into the Group. The Company disposed of 100%
equity interest in Qingdao Chenming International Logistics Co., Ltd. and 100% equity interest in Shouguang
Chenming Industrial Logistics Co., Ltd. Such companies were excluded from the scope of consolidation.
26 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
2. Revenue and cost (Cont’d)
(7) Significant change in or adjustment of the businesses, products or services of the Company during the
reporting period
Applicable √ Not applicable
(8) Sales to major customers and major suppliers
Sales to major customers of the Company
Total sales to top 5 customers (RMB) 4,206,250,003.00
Total sales to top 5 customers as a percentage of the total sales for the year 13.68%
Sales to top 5 customers who are related parties as a percentage of the total sales for the
year 0.00%
Information on top 5 customers of the Company
As a percentage
of the total sales
No. Name of customer Sales (RMB) for the year (%)
1 Customer A 1,517,790,193.09 4.94%
2 Customer B 874,517,197.71 2.85%
3 Customer C 757,788,686.39 2.47%
4 Customer D 568,959,413.24 1.85%
5 Customer E 487,194,512.57 1.59%
Total – 4,206,250,003.00 13.68%
Other explanation of the major customers
Applicable √ Not applicable
2020 ANNUAL REPORT 27
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
2. Revenue and cost (Cont’d)
(8) Sales to major customers and major suppliers (Cont’d)
Major suppliers of the Company
Total purchases from top 5 suppliers (RMB) 3,318,628,631.65
Total purchases from top 5 suppliers as a percentage of the total purchases for the year 14.03%
Total purchases from top 5 suppliers who are related parties as a percentage of the total
purchases for the year 0.00%
Information on top 5 suppliers of the Company
As a percentage of
the total purchases
No. Name of supplier Purchases (RMB) for the year (%)
1 Supplier A 728,638,276.95 3.08%
2 Supplier B 713,093,673.39 3.02%
3 Supplier C 712,173,613.55 3.01%
4 Supplier D 618,918,206.86 2.62%
5 Supplier E 545,804,860.90 2.31%
Total – 3,318,628,631.65 14.03%
Other explanation of the major suppliers
Applicable √ Not applicable
3. Expenses
Unit: RMB
Increase/
2020 2019 Decrease (%) Reasons for material changes
Selling and distribution 298,246,355.91 320,810,724.85 -7.03% Salaries and travel expenses decreased
Expenses year on year during the reporting
period.
General and administrative 1,025,420,660.39 1,134,725,391.84 -9.63% Loss on work stoppage decreased year
expenses on year during the reporting period.
Finance expenses 2,562,065,063.22 2,916,029,154.37 -12.14% Interest expenses of the Company
decreased year on year during the
reporting period.
Research and development 1,274,355,241.49 992,312,956.74 28.42% The Company increased efforts in
expenditure research and development during the
reporting period.
28 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
4. Research and development expenditure
√ Applicable Not applicable
During the reporting period, the Company’s technological R&D centre is carrying out its guiding principle of
“optimisation and innovation, leading technologies, structural adjustment, increasing economic benefit, quality
management, first-class quality, improving management and great achievements”. We are always guided by
customers’ needs. Improving economic benefits is our goal. We keep pushing technological innovations, the
production of products with high added value, technological optimisation, aiming to improve the quality of our
products. In 2020, the Company obtained 76 national patents, one of which was a patent of paper making
denaturation amylum, representing the Company’s breakthrough in the field of papermaking denaturation amylum.
We applied for special technological research cases on the provincial level vigorously. Five cases were on the list of
2020 Shandong Technological Innovation Special Cases, for instance, the “Technological Development of Effective
Sizing with Electrostatic Paper” case, the “Technological Development of Art Paper for Advertisement” case and the
“Technological Development of Art Paper for Culture”. The “Technological Development of Rime Art Paper” case
and the “Super High Bulk Art Paper for Children’s Picture Album” were honoured as the Excellent New Product of
2020 Shandong Technological Innovation Award and the First Prize of Excellent New Achievement. The Company
will continue adhering to the orientation of technological innovation. We will improve our R&D and product quality in a
sustained way, aiming to take our core competence in developing the enterprise to a higher level.
Research and development expenditure of the Company
Percentage
2020 2019 of change
R&D headcount 1,933 1,925 0.42%
Ratio of R&D personnel 15.16% 14.07% 1.09%
R&D expenditure (RMB) 1,274,355,241.49 992,312,956.74 28.42%
R&D expenditure to revenue 4.15% 3.26% 0.89%
Reasons for significant change in total R&D expenditure to revenue
Applicable √ Not applicable
Reasons for and reasonableness of the significant change of the capitalisation rate of R&D expenditure
Applicable √ Not applicable
2020 ANNUAL REPORT 29
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
5. Cash flows
Unit: RMB
Increase/
Item 2020 2019 decrease (%)
Subtotal of cash inflows from operating activities 40,142,770,644.64 41,633,562,986.95 -3.58%
Subtotal of cash outflows from operating activities 28,882,967,968.36 29,400,855,764.01 -1.76%
Net cash flows from operating activities 11,259,802,676.28 12,232,707,222.94 -7.95%
Subtotal of cash inflows from investing activities 800,515,222.13 1,135,086,731.00 -29.48%
Subtotal of cash outflows from investing activities 981,555,028.94 3,160,639,742.95 -68.94%
Net cash flows from investing activities -181,039,806.81 -2,025,553,011.95 91.06%
Subtotal of cash inflows from financing activities 31,654,325,203.77 34,920,351,820.10 -9.35%
Subtotal of cash outflows from financing activities 41,248,363,106.56 44,407,779,477.64 -7.11%
Net cash flows from financing activities -9,594,037,902.79 -9,487,427,657.54 -1.12%
Net increase in cash and cash equivalents 1,498,841,936.39 508,769,784.89 194.60%
Explanation on main effects of material changes in relevant data year-on-year
√ Applicable Not applicable
Net cash flows from investing activities increased by 91.06% as compared to the corresponding period of the prior
year mainly due to the purchase of the equity interest in Nanyue Bank by the Company during the corresponding
period of the prior year.
Explanation on reasons leading to the material difference between net cash flows from operating activities during the
reporting period and net profit for the year
Applicable √ Not applicable
III. Analysis of non-principal operations
Applicable √ Not applicable
30 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Discussion and Analysis of Operations
IV. Analysis of assets and liabilities
1. Material changes of asset items
Particulars in relation to adjustments made to relevant items of the financial statements as at the beginning of the year
of the initial adoption of New Revenue Standard and New Leases Standard by the Company from 2020
Not applicable
Unit: RMB
As of the end of 2020 As of the beginning of 2020
As a percentage As a percentage Percentage
Amount of total assets Amount of total assets change Description
Accounts receivable 1,984,931,665.82 2.17% 2,525,083,311.03 2.58% -0.41% Mainly due to the Company stepping up its
efforts to recover its receivables and increased
its account receivable turnover rate.
Prepayments 964,290,512.36 1.05% 603,573,549.08 0.62% 0.44% Mainly due to the increase of the Company’s raw
material prepayment.
Non-current assets due 4,222,744,207.34 4.61% 6,974,539,613.30 7.12% -2.51% Mainly due to the extension granted to certain
within one year financial leasing customers as affected by the
COVID-19 epidemic.
Other current assets 2,716,918,695.85 2.97% 8,108,707,394.70 8.28% -5.31% Mainly due to continued reduction of the scale of
the financial leasing business.
Long-term receivables 4,658,884,857.95 5.09% 1,200,575,810.95 1.23% 3.86% Mainly due to the extension granted to certain
financial leasing customers as affected by the
COVID-19 epidemic.
Investment properties 5,943,159,568.00 6.49% 5,082,362,293.11 5.19% 1.30% Mainly due to the transfer of Shanghai Herui’s
equity to offset the debts of the leasing
companies.
Fixed assets 37,651,706,658.97 41.12% 34,439,935,032.69 35.16% 5.96% Mainly due to the transfer of assets of the
Construction in progress 179,857,941.83 0.20% 5,476,122,928.95 5.59% -5.39% Huanggang chemical pulp project.
Short-term borrowings 32,793,992,957.86 35.81% 36,883,156,014.19 37.65% -1.84% Mainly due to the active reduction of the scale of
short-term debt.
Bills payable 2,998,936,736.34 3.27% 1,515,048,206.00 1.55% 1.73% During the reporting period, the Company
increased its payment for goods with bills.
Other payables 1,956,715,367.83 2.14% 2,594,249,626.54 2.65% -0.51% Mainly due to the repayment of shareholders’
financial assistance during the reporting period.
Non-current liabilities due 7,160,949,615.93 7.82% 5,662,958,920.03 5.78% 2.04% Mainly due to the medium-term notes due within
within one year one year, and the reclassification of its effect.
Bonds payable 1,536,877,351.46 1.68% 1,258,270,909.49 1.28% 0.39% Mainly due to the resale of the 350 million
Corporate Bonds during the reporting period.
Other non-current liabilities 789,521,686.07 0.86% 3,042,841,328.86 3.11% -2.24% Mainly due to the reclassification of certain
medium-term notes to non-current liabilities
due within one year during the reporting period.
Other equity instruments 5,473,500,000.00 5.98% 7,465,500,000.00 7.62% -1.64% Repayment of the 2 billion Perpetual Bonds
during the reporting period.
2020 ANNUAL REPORT 31
V Discussion and Analysis of Operations
IV. Analysis of assets and liabilities (Cont’d)
2. Assets and liabilities measured at fair value
√ Applicable Not applicable
Unit: RMB
Profit or loss Cumulative Impairment Increase in
from change in fair value provided purchases/
Opening fair value during change charged during breeding during Disposal during Other Closing
Item balance the period to equity the period the period the period changes balance
1. Held-for-trading financial
assets (excluding derivative
financial assets) -2,777,016.53 -2,777,016.53 195,684,817.15 192,907,800.62
2. Other non-current financial
assets 147,445,653.55 9,464,346.45 55,910,000.00 4,000,000.00 15,000,000.00 145,910,000.00
3. Consumable biological
assets measured at fair value 1,541,004,633.42 -13,329,852.55 20,102,661.98 66,312,515.15 58,600,430.58 1,535,386,865.44
Whether there were any material changes on the measurement attributes of major assets of the Company during the
reporting period
Yes √ No
3. Restriction on asset rights as at the end of the reporting period
Unit: RMB
Carrying amount
as at the end of
Item the period Reasons for such restriction
Monetary funds 13,022,652,331.98 As deposits for bank acceptance bills and letters of credit,
and deposit reserves etc.
Held-for-trading financial assets 96,453,900.31 As deposits for borrowings from Haitong International
Accounts receivable financial Securities
Investment properties 5,555,551.65 As collateral for letters of guarantee and letters of credit
Fixed assets 4,929,794,589.62 As collateral for bank borrowings
Intangible assets 11,147,836,807.04 As collateral for bank borrowings and long-term payables
1,247,015,765.23 As collateral for bank borrowings and long-term payables
Total 30,449,308,945.83
32 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Discussion and Analysis of Operations
V. Investments
1. Overview
√ Applicable Not applicable
Investments during
the corresponding
period of prior year
Investments during the reporting period (RMB) (RMB) Change
1,940,190,000.00 3,601,194,479.24 -46.12%
2. Material equity investments during the reporting period
√ Applicable Not applicable
Unit: RMB
Profit or loss
Progress as from Date of
Form of Investment Source of Period of at the date of Estimated investment Involvement disclosure Disclosure index
Name of investee Principal activities investment amount Shareholding fund Partner(s) investment Product type balance sheet return for the period in lawsuit (if any) (if any)
Kunshan Tuoan Plastic Plastic products Acquis t on 220,000,000.00 100% Self-owned Subsid ary Long-term Plastic products Completed 0.00 7,770,967.40 No Not appl cable Not appl cable
Products Co., Ltd. funds
Hainan Chenming Technology Goods procurement and Newly 10,000,000.00 100% Self-owned Subsid ary Long-term Wood products, Completed 0.00 214,053.76 No Not appl cable Not appl cable
Lim ted sales establ shed funds wood pulp,
machine-made
paper
Hubei Changj ang Chenming Consult ng service Newly 533,390,000.00 59.97% Self-owned Hubei Changj ang Operating period Privately placed Completed 0.00 – No 24 December http://www.cninfo.com.cn
Huanggang Equity Investment business related to establ shed funds (Huanggang) of 5 years, 2020
Fund Partnership (Lim ted non-securit es equity Asset Investment automatic
Partnership) i vestment activ t es Fund Partnership extension after
(Lim ted maturity
Partnership)
Shandong Dingkun Asset Asset management Newly 1,000,000,000.00 99.90% Self-owned Subsid ary Long-term Asset Completed 0.00 -31,859,598.23 No 24 December http://www.cninfo.com.cn
Management Partnership services for self-owned establ shed funds management 2020
(Lim ted Partnership) fund i vestments
Shanghai Herui Investment Co., Industria i vestment Acquis t on 176,800,000.00 100% Self-owned Subsid ary Long-term Investment Completed 0.00 – No 5 December http://www.cninfo.com.cn
Ltd. funds apartment 2020
Total – – 1,940,190,000.00 – – – – – – 0.00 -23,874,577.07 – – –
3. Material non-equity investments during the reporting period
Applicable √ Not applicable
2020 ANNUAL REPORT 33
V Discussion and Analysis of Operations
V. Investments (Cont’d)
4. Financial asset investment
(1) Security investments
√ Applicable Not applicable
Unit: RMB
Book value at Profit or loss
the beginning from changes Accumulated Purchased Profit or Book value
Initial Accounting of the in fair value changes in fair amount in Sold amount loss during at the end of
Stock Abbreviation of investment measurement reporting in the current value included the current in the current the reporting the reporting Classification Source of
Type of security code stock name cost model period period in equity period period period period in accounts shareholding
Domestic and 09668 China Bohai 195,684,817.15 Measured at 0.00 -2,777,016.53 -2,777,016.53 195,684,817.15 0.00 -2,777,016.53 192,907,800.62 Held-for-trading Self-owned funds
foreign shares Bank fair value financial assets and borrowings
Total 195,684,817.15 – 0.00 -2,777,016.53 -2,777,016.53 195,684,817.15 0.00 -2,777,016.53 192,907,800.62 – –
Disclosure date of announcement in relation 20 June 2020
to the consideration and approval of securities
investments by the Board
Disclosure date of announcement in relation Not applicable
to the consideration and approval of securities
investments by the shareholders’ general
meeting (if any)
(2) Derivatives investments
Applicable √ Not applicable
The Company did not have any derivative investments during the reporting period.
5. Use of proceeds
Applicable √ Not applicable
The Company did not use any proceeds during the reporting period.
34 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Discussion and Analysis of Operations
VI. Disposal of material assets and equity interest
1. Disposal of material assets
Applicable √ Not applicable
The Company did not dispose any material assets during the reporting period.
2. Disposal of material equity interest
√ Applicable Not applicable
Net profit
contribution
to the
Company Net profit
from the contribution to Carried out on
beginning of the Company schedule or
the period on equity Relevant not, if not,
up to the disposal as a Related asset the reasons
Transaction disposal percentage of Pricing basis of party Relationship title fully and measures
Equity interest Disposal consideration date Effect of disposal total net disposal of transaction with transferred taken by Disclosure Disclosure
Counterparty(ies) disposed of date (RMB’0,000) (RMB’0,000) on the Company profit (%) equity interest or not counterparty(ies) or not the Company date index
Zhanjiang Kangyao Shouguang 29 February 710 -397.07 Beneficial for 0.66% Appraised value No Not related party Yes Transfer Not applicable Not applicable
Timber Limited Chenming 2020 resources integration completed
Industrial of the Company,
Logistics asset portfolio
Co., Ltd. optimisation, and
Zhanjiang Kangyao Qingdao 29 February 2,300 -36.61 concentration of 0.32% Appraised value No Not related party Yes Transfer Not applicable Not applicable
Timber Limited Chenming 2020 competitive edges completed
International on principle
Logistics businesses to
Co., Ltd. improve quality and
efficiency.
2020 ANNUAL REPORT 35
V Discussion and Analysis of Operations
VII. Analysis of major subsidiaries and investees
√ Applicable Not applicable
Major subsidiary and investees accounting for over 10% of the net profit of the Company
Unit: RMB
Type of Registered
Name of company company Principal activities capital Total assets Net assets Revenue Operating profit Net profit
Zhanjiang Chenming Subsidiary Production and sale 5,550,000,000.00 23,682,487,540.14 10,198,061,649.33 11,870,586,483.29 1,324,125,687.68 1,192,007,567.15
Pulp & Paper Co., Ltd. of duplex press paper,
electrostatic paper,
and white paper board
Jiangxi Chenming Paper Subsidiary Production and sale of 2,448,235,549.05 7,640,903,439.72 3,344,498,934.32 3,434,854,907.78 294,479,476.26 265,237,736.13
Co., Ltd. white paper board,
cultural paper and light
weight paper
Shouguang Meilun Paper Subsidiary Production and sale of 3,432,631,579.00 14,925,462,793.85 5,880,335,249.54 8,070,365,747.22 227,550,879.88 219,893,721.83
Co., Ltd. coated paper, cultural
paper, household paper
and chemical pulp
Shandong Chenming Subsidiary Financial services 5,000,000,000.00 8,154,685,390.31 5,348,813,486.25 358,333,247.22 283,123,201.10 211,363,966.26
Group Finance Co., Ltd.
36 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Discussion and Analysis of Operations
VII. Analysis of major subsidiaries and investees (Cont’d)
Acquisition and disposal of subsidiaries during the reporting period
√ Applicable Not applicable
Methods to acquire and
dispose of subsidiaries during Impact on overall production and
Name of company the reporting period operation and results
Chenming (Overseas) Co., Ltd. Newly established There are few business operations and
no impact at the moment.
Chenming (Singapore) Co., Ltd. Newly established There are few business operations and
no impact at the moment.
Qingdao Chenming Import and Export Trade Co., Ltd. Newly established There are few business operations and
no impact at the moment.
Hainan Chenming Technology Co., Ltd. Newly established Net profit increased by RMB0.21 million.
Hubei Changjiang Chenming Huanggang Equity Newly established There are few business operations and
Investment Fund Partnership (Limited Partnership) no impact at the moment.
Hubei Huanggang Chenming Equity Investment Fund Newly established There are few business operations and
Management Limited no impact at the moment.
Shandong Dingkun Asset Management Partnership Newly established Net profit decreased by RMB31.86
(Limited Partnership) million.
Huanggang Chenming Paper Technology Limited Newly established There are few business operations and
no impact at the moment.
Shanghai Herui Investment Co., Ltd. Acquisition There are few business operations and
no impact at the moment.
Kunshan Tuoan Plastic Products Co., Ltd. Acquisition Net profit increased by RMB7.77 million.
Shandong Chenming Paper Group (Fuyu) Sales Merger Net profit decreased by RMB0.32 million.
Co., Ltd.
Shouguang Chenming Industrial Logistics Co., Ltd. Transfer of 100% equity interest Net profit increased by RMB5.41 million.
Qingdao Chenming International Logistics Co., Ltd. Transfer of 100% equity interest Net profit increased by RMB11.36 million.
Particulars of major subsidiaries and investees
1 For the integrated forestry, pulp and paper project of Zhanjiang Chenming, the gross profit margin of its main
products, electrostatic paper and white paper board, reached a high level, showing strong profitability.
2 Jiangxi Chenming is mainly engaged in the production and sales of white paper board and culture paper, and the
profitability of white paper board has increased.
3 Shouguang Meilun is responsible for the production and sales of coated paper and culture paper, and its profitability
will further improve after its 1,000,000 tonne chemical pulp project commences operation.
4 The Finance Company, as the financial institution serving the Group’s companies, saved financial costs for the
Company and recorded sound profitability.
2020 ANNUAL REPORT 37
V Discussion and Analysis of Operations
VIII. Structured entities controlled by the Company
Applicable √ Not applicable
IX. Outlook on the future development of the Company
(i) Overview and development trend of the industry
Last year, despite the unfavourable factors in macro-economy and global public health issue, the Chinese
papermaking industry was able to withstand all kinds of pressure and overcame challenges, thus realising steady
growth. According to the National Bureau of Statistics, in 2020, the production volume of machine-make paper and
paper board in China was 127.0063 million tonnes, representing a year-on-year increase of 1.48%. National-scale
enterprises realised total profit of RMB6,451.610 billion, representing an increase of 4.1% from last year. The supply-
side reform has gradually deepened. Low-end production capacity may actively exit the industry or passively forced
out from the industry. The industry completion has further optimised, and the industry leaders had a greater influence
in the industry. The Waste Prohibition Order was implemented effectively. The optimisation of industry chain became
a national strategy. Industry leaders accelerated industry chain layout.
Papermaking industry is a typical industry with high entry barriers, and featured with obvious oligopoly. Looking
forward, as driven by environmental protection policies, the industry concentration is expected to further enhance.
In addition, the Waste Prohibition Order and the Plastic Restriction Order had directly and indirectly increased the
demand in upper stream paper pulp supply. In respect of overseas market, the Company will create a better “combo”
through diversified market tools, aiming to enhance its influence in global raw material market. In respect of domestic
market, the acceleration in industry chain construction and optimisation of self-supply of raw materials to secure
stable supply will be the key focus of the industry in the future.
(ii) Development strategy of the Company
2021 is the opening year of the “14th Five Year Plan”. As guided by the national key direction of “adhering to the
new development concept and building new development trend at the new development stage”, the Company
will remain true to our original aspiration and develop by grasping opportunities arise. Taking “revitalising the
Chinese papermaking industry” as our mission with scientific development as main theme, centring on efficiency
enhancement, and focusing on pulp production and papermaking as major operation, the Company will concentrate
on strengthen the industry, and continue to put great efforts in the implementation of strategies driven by innovation
and development. The Company will accelerate the growth driver replacement. With transformation and upgrade
guided by green ecology, the Company will fully exploit its advantages in full industry chain and adhere to the path
of quality, sustainable green and low carbon development, thereby offering customers with more eco-friendly, quality
products and services. The Company will also strive to achieve the corporate mission of “developing Chenming as a
RMB100 billion enterprise with sustainable operation for a century”.
38 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(iii) Operation plans for 2021
Stepping into a new path and get ready to set off. In 2021, the Company will develop the core value of “achieving
win-win situation with sincere operation”, adhere to the management direction of “efficient management, structure
adjustment, market exploration and strict risk control”, and continue to carry forward our corporate philosophy of
“learning, surpassing limits and maintaining leading position”. The Company will focus on operation management,
further implement various working directions formulated, fully enhance corporate management level, and promote
quality development of the Company.
1. Focus on corporate management and efficiency enhancement
Adhering to the working direction of “focusing on execution for system optimisation, incentive for appraisal
enhancement, actual effect for team building, and result for management improvement”, the Company will fully
enhance its management standards. Firstly, the Company will focus on system implementation, implement
automated operation in key procedures, and formulate case study analysis for typical issues. Secondly, the
Company will enhance its appraisal incentives, further optimise appraisal measures, highlight the performance
of key functions, implement appraisal measures on key operations, and motivate the work enthusiasm of
employees. The Company will also strictly implement performance-based incentive measures for cost reduction,
efficiency enhancement and fight for policy, and effectively mobilise the enthusiasm and creativity of works.
Thirdly, the Company will strengthen team building. Referencing to the advanced ways on talent recruitment of
outstanding enterprises, the Company will introduce talent to its senior management, and improve the overall
quality of management team. The Company will establish a professional training team, which will offer accurate,
effective and practical trainings for the development of the Company.
2. Focus on sales management and strive for innovation and breakthrough
Adhering to the concept of accountable to the customers, the sales system will continue to implement the
working direction of “getting familiar to market operation, striving for structure adjustment, implementing strict
control over business risk and comprehensively improving management”. The Company will strengthen basic
management, create innovative sales model, and further increase the market share of products of the Company.
Firstly, the Company will assess market trend, enhance market operation, adjust product portfolio, and
improve the effectiveness of price rise. Secondly, the Company will optimise the sales network and after-sale
service network, proactive expand overseas sales channels and enhance its cooperation with core direct sale
customers, thereby offering efficient, quick and whole process services for customers. Thirdly, the Company will
fully enhance basic management, improve management system, formulate sales policies in line with the actual
market condition, increase control points on operational procedures, and eliminate sales weaknesses. Fourthly,
the Company will strengthen team building, establish innovative appraisal model, and implement comprehensive
“meshing” management over key markets and regions. The Company will also enhance the expertise of sales
personnel, aiming to establish an efficient sales team.
2020 ANNUAL REPORT 39
V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(iii) Operation plans for 2021 (Cont’d)
3. Strengthening financial management to lower financial costs
The financial system will continue with the thorough implementation of the principles of “strict control over the
use of funds, strengthening financing capabilities, enhancing cost control, and comprehensively improving
management”, as well as optimise the debt structure, in an attempt to ensure high-quality and stable
operation of the Company. Firstly, we will strengthen basic management, promote the application of financial
management software in relation to credit and financial statements, strengthen computer control, and improve
our ability to analyse financial big data. Secondly, our measures to optimise the financing structure include
reasonable planning of the issuance and composition of long-term and short-term bonds, implementation of
equity financing projects such as convertible bonds and refinancing, further efforts in reducing the scale of
financial leasing and bringing the Company’s gearing ratio down. Thirdly, we will increase revenue and reduce
expenditure, proactively pursue preferential policies, optimise performance indicators of financing costs, and
reduce financial expenditures.
4. Emphasis on production management to enhance production capability and efficiency
The production system will continue to implement the business concepts of “stable operation, greater
production capacity, better quality, and lower costs”, and earnestly strive for safe and green production.
Firstly, we will strengthen equipment management, strictly conduct equipment inspection, apply management
specifications, promote the application of equipment informatisation and equipment check to give full play
to their performance. Secondly, we will strengthen the management of spare parts, achieve comprehensive
computer control over inventory, and reduce capital occupation of spare parts and inventory. Thirdly, we
will make adjustments to technology structure, focus on the production of high value-added products,
and comprehensively increase the pulp and paper production capacity by optimising the pulp formula and
strengthening the control measures in business operations. Fourthly, we consistently pay attention to the safety
and environmental protection work and offer training and education on this topic. We will improve the business
skills of the production system team, troubleshoot and deal with potential safety hazards, defence the bottom
line of safety, aim at zero environmental accident, and effectively improve the level of production management.
5. Improving supply chain management to reinforce management in all respects
In order to improve service quality and create value, the supply chain management centre will adhere to its
internal principles, further strengthen supply chain management, actively seek policy support, strengthen
source procurement and expand business scopes. First of all, we will optimise the management of the supplier
platform, introduce a competitive mechanism, identify outstanding suppliers to forge and improve stable and
long-term strategic cooperation with them. Furthermore, we will improve the supply chain business process,
strictly control capital occupation, reinforce the management of the business plans, share and transfer raw
materials within the Group, and carry out consignment sales and other measures. Key nodes are included in
the early warning of computer control. In addition, we will perform in-depth research about the futures market,
actively use this instrument to optimise raw material prices, prevent price risks, and achieve price advantages
with the use of futures. Last but not least, we will promote the construction of procurement information system,
draw reference from practices of the international leading companies, and build an information platform to
realises resource sharing.
40 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(iii) Operation plans for 2021 (Cont’d)
6. Other works commence orderly
Firstly, the Company will focus on supervision and management so as to eliminate management frauds. We
will establish a strong team specialising in operation. Based on the preliminary works, the Company will visit
work sites and discover any problem in a timely manner. Any incompliance will be vigorously combated. The
Company will optimise internal control procedures, improve risk prevention and management system, and
implement strict procedure management and procedure control. We promote standard corporate operation
through internal supervision over internal control, information exchange mechanism and self-assessment
mechanism. In addition, we will improve our corporate legal risk prevention mechanism, and enhance procedure
supervision and significant risk control.
Secondly, the Company will enhance our service sense and improve service efficiency. Different administrative
departments will improve the professionalism, initiative and efficiency of our service by positioning themselves
in serving the production and frontline sales. Departments will also build the awareness on serving each other,
unblock cooperation channels and enhance work efficiency.
Thirdly, the Company will develop innovative marketing initiatives so as to enhance marketing effects. By fully
utilising new media and focusing on key areas, marketing campaigns will be launched centring on the dynamic
corporate development, phrasal key events and results, advanced management concepts and measures,
meritorious deeds, recreational activities and other aspects, aiming to improve the quality and standard of
marketing.
(iv) Future capital requirements and source of funds
Focusing on principal operation, and striving to the strategic plan on pulp and paper integration, the Company
continued to strengthen its core competitiveness. Future capital requirements of the Company will mainly focus on:
the continuous investment in existing production facilities due to technology upgrade or production expansion; and
capital requirement for business expansion and daily operation. During the reporting period, the phase II construction
of Huanggang Chenming was considered and approved at the 2020 fourth extraordinary meeting of the Company.
The proposed total investment was RMB12.8 billion, which will be partly funded by self-owned funds of the Company,
as well as government guide funds, policy support funds and syndicated loans.
In order to meet various business development of the Company and further extend and expand the industry chain,
the Company proactively expand financing channels, enhance credit management, implement well planned long and
short-term bond issue, GDR Fund, introduce and cooperate with factories and strategic investors, diversify financing
channels through refinancing and other means, and optimise financing structure, thus providing stable financial
support for the operation and development of the Company.
2020 ANNUAL REPORT 41
V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(v) Risk factors likely to be faced and measures to be taken
1. Macroeconomic and policy risk
Paper making industry is a basic raw materials industry, thus is being supported by national industry policies.
Over the years, relevant competent departments issued a series of relevant policies, laws and regulations,
including the Policy on Papermaking Industry, aiming to improve industry structure, enhance product technology
and standard, energy saving and emission reduction, as well as eliminate outdated production capacity. With
the continuous economic development, the policies on papermaking industry may further adjust in the future. In
addition, the fiscal and financial policies, bank interest rate, import and export policy and other policies may be
adjusted in the future, which will affect the operation and development of the Company to a certain extent.
Focusing on its principal operation on pulp production and papermaking, the Company will strive to its
innovation-driven strategy. Centring on improving efficiency, with the in-depth incorporation of smart technology
into industrial activities as main theme, the Company will comprehensively optimise industrial structure and
regional layout, establish coordinated, efficient industry system, and respond to challenges arose by leveraging
on its cost advantages, thus realising steady growth in operating results. At the same time, the Company will
strengthen the financial information system construction, regulate financial management, enhance financing
capability, lower capital cost and strengthen its economic risk aversion capability.
2. Risk of intensifying market competition
As driven by industry policies, environmental protection policies, trade environment and other factors,
papermaking enterprises commerce strategic transformation and upgrade, put greater efforts in innovation and
research and development, improve quality and efficiency, and enhance product competitiveness, resulting in
intensifying market competition.
Leveraging on its vigorous management and world class equipment and technologies, the Company will
continue to increase the value of Chenming brand, and enhance brand influence. The Company constructed
several high-end paper production lines, with diversified product structure and full range of products, thus
diversifying market risk effectively and strengthening the market aversion capability of the Company. Based
on the location of production base, products of the Company achieved sales in nearby areas and quick
delivery, thus effectively lowering transportation cost, radiating to market network and enhancing market
competitiveness.
3. Risk of price fluctuation of raw materials
Wood pulp and wood clips are the major raw materials of the Company. The market price of wood pulp
fluctuates significantly, while wood clips are heavily dependent on export. If there is a significant fluctuation in
prices of raw materials in the future, the product costs of the Company’s products will be affected, which in
turns affect the performance of the Company.
The Company strives to implement the development strategy of pulp and paper integration. At present, the
Company has 3 large chemical pulp production lines in Shouguang, Zhanjiang and Huanggang. Looking
forward, the Company will focus on the construction of Hubei Huanggang Production Base in Central China,
aiming to further optimise the industry chain of the integrated pulp and paper project of Huanggang Chenming,
create the strategic layout of three major product bases for pulp and paper integration in Shandong, Zhanjiang
and Huanggang, fully exploit the advantages of full industry chain, get rid of the restrictions brought by raw
materials on the Company, and strengthen the core competitiveness of the Company.
42 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(v) Risk factors likely to be faced and measures to be taken (Cont’d)
4. Environmental protection policy risk
In recent years, China’s environmental protection standards have become stricter. During the reporting period,
China successively introduced and implemented the Law on the Prevention and Control of Environmental
Pollution by Solid Waste (revised), Management Law of Waste Disposal Permit (Draft) and other systems. A
higher emission standard is bound to increase the environmental protection costs in the industry and a high
entry standard may result in the slowdown of scale expansion.
The Company always adheres to the development idea of “placing green development and environmental
protection as its priority”. Starting from the source of production, the Company widely adopts new technologies
for energy saving and emission reduction and strives to maximise its resource utilisation. Meanwhile, the
Company will make greater efforts to construct environmentally friendly projects and strive to achieve its waste
emission target. At present, the Company adopts the world’s most advanced “ultrafiltration membrane+reverse
osmosis membrane” technology to complete the reclaimed water recycling membrane treatment project.
The reclaimed water recycle rate reaches more than 75%. The reclaimed water quality meets drinking water
standards, which can save fresh water every day 170,000 cubic meters. At the same time, the Company actively
explores the comprehensive utilisation of innovative resources and industrial recycling development models,
and built three major circular economy ecological chains of “resources-products-renewable resources”.
5. Risk on financial leasing business
The Company may suffer from loss if the lessees of its financial leasing business cannot make full rental
payment on time due to any reason and there are abuses on equipment or any other short-term behaviour.
Although the risk of such rental being unrecoverable is minimal, the Company will also make bad debt provision
as required under its accounting policy. If such amounts cannot be recovered on time, the Company may be
exposed to risk of bad debts.
Chenming Leasing has comprehensive risk prevention and control measures for the Company’s financial leasing
business, with strong risk resistance and low risk of default. At present, Financial Leasing Company continues
to implement the business strategy of continuous reduction, with net recovery of proceeds of RMB3.6 billion
realised in 2020, which effectively put risk exposures under control.
2020 ANNUAL REPORT 43
V Discussion and Analysis of Operations
X. Reception of research investigations, communications and interviews
1. Reception of research investigations, communications and interviews during the reporting period
√ Applicable Not applicable
Date of Site of Way of Type of Major discussion points Index of the basic particulars
reception reception reception recipient Recipient and information provided of the survey
1 April 2020 Meeting room of Phone Institutions Southern Asset Management, Company’s main operating For details, please refer to the
the Company Rongtong Fund, Galaxy conditions, business Investor Relations Activity
AMC, China Merchants Fund, conditions and project Record Sheet on
Changxin Fund, Dongwu progress www.cninfo.com.cn
Light Engineering, E Fund,
Sun Life Everbright, ICBC
Credit Suisse etc.
8 April 2020 Meeting room of Phone Institutions Shenwan Hongyuan Security, Company’s main operating For details, please refer to the
the Company Dacheng Fund, Huatai conditions, business Investor Relations Activity
Insurance, Yinhua Fund, conditions and project Record Sheet on
UBS SDIC, HSBC Jintrust, progress www.cninfo.com.cn
China Life Pension Company,
Essence Fund etc.
29 September Panorama Network Individuals, Investors who participated Corporate governance, Panorama Roadshow
2020 Roadshow institutions in the 2020 Investor Online development strategy, http://rs.p5w.net/
platform Collective Reception Day operating status
of Listed Companies in
Shandong
Times of communications 3
Number of institutions communicated with 38
Number of individuals communicated with 22
Number of other communication parties 0
Tip-offs or leakages of substantial confidential information during No
the communications
44 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VI Directors’ Report
The Directors (the “Directors”) of the Company hereby present the annual report and the audited consolidated financial statements
of the Company and the Group for the year ended 31 December 2020.
I. Principal activities
Please refer to section IV “Business Overview”, and “I. Principal operations of the Company during the Reporting Period”
and “II. Analysis of principal operations” under section V “Discussion and Analysis of Operations” for details of principal
activities of the Company.
II. Results and profit distribution
Please refer to section XIII “Financial Report” for the results of the Group for the year ended 31 December 2020.
III. Dividends
After the end of the reporting period, the Board proposed to pay a final dividend for the year ended 31 December 2020 (“final
dividend”) of RMB1.85 in cash for every 10 Shares (tax inclusive) (2019: dividend of RMB1.465828 in cash for every 10
Shares (tax inclusive)) to the ordinary shareholders of the Company, subject to approval of shareholders at the forthcoming
Annual General Meeting (“AGM”) of the Company held on 18 June 2021. Upon approval of shareholders of the Company at
the AGM, the Company is expected to pay the final dividend on or by 18 August 2021 to shareholders whose names appear
on the register of members of the Company on 24 June 2021.
In accordance with the Corporate Income Tax Law of the PRC and its implementation rules effective on 1 January 2008,
where a PRC domestic enterprise distributes dividends for financial periods beginning from 1 January 2008 to non-resident
enterprise shareholders, it is required to withhold 10% corporate income tax for such non-resident enterprise shareholders.
Therefore, as a PRC domestic enterprise, the Company will, after withholding 10% of final dividends as corporate income
tax, distribute the final dividends to non-resident enterprise shareholders, i.e. any shareholders who hold the Company’s
Shares in the name of non-individual shareholders, including but not limited to HKSCC Nominees Limited, or other
nominees, trustees, or holders of H Shares registered in the name of other organisations and groups.
Due to changes in the PRC tax laws and regulations, according to the Announcement on the List of Fully and Partially
Invalid and Repealed Tax Regulatory Documents issued by the State Administration of Taxation (
) on 4 January 2011, individual Shareholders who hold the Company’s H
Shares and whose names appeared on the H Share Register of the Company can no longer be exempted from individual
income tax pursuant to the Notice of the State Administration of Taxation Concerning the Taxation of Gains on Transfer and
Dividends from Shares (Equities) Received by Foreign Investment Enterprises, Foreign Enterprises and Foreign Individuals
(Guo Shui Fa [1993] No. 045) (
( [1993]045 )) issued by the State Administration of Taxation, whilst pursuant to the letter titled Tax Arrangements
on Dividends Paid to Hong Kong Residents by Mainland Companies issued by the Stock Exchange to the issuers on 4
July 2011 and the Notice on Matters Concerning the Levy and Administration of Individual Income Tax after the Repeal of
Guo Shui Fa [1993] No. 045 of State Administration of Taxation (Guo Shui Han [2011] No. 348) (
[1993]045 ( [2011]348 )), it is confirmed that the overseas resident
individual shareholders holding shares of domestic non-foreign invested enterprises issued in Hong Kong are entitled to
the relevant preferential tax treatments pursuant to the provisions in the tax arrangements between the countries where
they reside and the PRC or the tax arrangements between the PRC and Hong Kong (Macau). Therefore, the Company will
withhold 10% of the dividend as individual income tax, unless it is otherwise specified in the relevant tax regulations and tax
agreements, in which case the Company will withhold individual income tax of such dividends in accordance with the tax
rates and according to the relevant procedures as specified by the relevant regulations.
2020 ANNUAL REPORT 45
VI Directors’ Report
IV. Closure of register of members
The register of members of the Company will be closed from 11 June 2021 (Friday) to 18 June 2021 (Friday), (both days
inclusive), during which no transfer of shares of the Company will be registered. In order to be eligible to attend and
vote at the annual general meeting to be held on 18 June 2021 (Friday), all share transfer documents accompanied by
the corresponding share certificates must be lodged with the Company’s Hong Kong share registrar and transfer office,
Computershare Hong Kong Investor Services Limited at shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road
East, Wan Chai, Hong Kong for registration not later than 4:30 p.m. on 10 June 2021 (Thursday).
V. Five-year financial summary
Please refer to “IX. Five-year financial summary under paragraph 19 of appendix 16 of the Hong Kong Listing Rules”
under section II “Company Profile and Key Financial Indicators” for the financial summary of the Company for the past five
financial years.
VI. Donations
During the year, the Company donated RMB8,922,077.88 (2019: RMB11,947,836.00) to non-profit making organisations.
VII. Subsidiaries
Please refer to “VII. Analysis of major subsidiaries and investees” under section V “Discussion and Analysis of Operations”
and “XX. Matters of significant of subsidiaries of the Company” under section VII “Material Matters” for the details of
acquisition and disposal of subsidiaries by the Company during the year.
VIII. Property, plant and equipment
Please refer to “II. Financial Statements 1. Consolidated Balance Sheet” under section XIII “Financial Report” for the details
of changes in property, plant and equipment of the Group for the year ended 31 December 2020.
IX. Share capital
Please refer to “I. Changes in shares” under section VIII “Changes in Share Capital and Shareholders” for details of changes
in share capital of the Company for the year ended 31 December 2020.
X. Pre-emptive rights
In accordance with the Articles of Association and the PRC laws, there are no rules requiring the Company to grant existing
shareholders pre-emptive rights on newly issued shares of the Company in proportion to their shareholdings.
XI. Transfer into reserves
The Company’s contributed surplus is distributable to shareholders in accordance with the Companies Law. As at 31
December 2020, the Company’s reserves available for cash distribution and/or distribution in specie, including contributed
surplus of the Company, amounted to RMB10,465,721,088.71 (2019: RMB9,792,126,677.35) as set out in “II. Financial
Statements 1. Consolidated Balance Sheet” under section XIII “Financial Report”.
46 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VI Directors’ Report
XII. Directors
As at 31 December 2020, the Directors of the Company were:
1. Executive Directors
Mr. Chen Hongguo
Mr. Hu Changqing
Mr. Li Xingchun
Mr. Li Feng
2. Non-executive Directors
Mr. Han Tingde
Mr. Li Chuanxuan
3. Independent Non-executive Directors
Ms. Yin Meiqun
Mr. Yang Biao
Mr. Sun Jianfei
According to the Articles of Association of the Company, all Directors, including non-executive Directors, have been
elected at the general meetings with a term of three years from June 2019 to June 2022. They may be re-elected for
another term upon expiry of tenure.
XIII. Directors’ service contracts
All Directors have entered into service contracts with the Company for a term from 11 June 2019 to 11 June 2022.
None of the Directors who have offered themselves for re-election at the forthcoming AGM have entered into any service
contract with the Company or any of its subsidiaries which cannot be terminated by the Group within one year without
payment of compensation other than statutory compensation.
2020 ANNUAL REPORT 47
VI Directors’ Report
XIV. Directors and Senior Management’s remuneration and the five highest paid individuals
Details of Directors and the Senior Management’s remuneration and the five highest paid individuals of the Company or/and
its subsidiaries are set out in “V. Personnel of the Company” in section X “Directors, Supervisors and Senior Management
and Staff” and “XII Related parties and related party transactions” in section XIII “Financial Report”.
In 2020, the Company had 23 Senior Management members in total, which included Directors, Supervisors and the Senior
Management. The remuneration of the Senior Management falls within the following ranges:
Range of remuneration (RMB) Number
4.8 million to 5.2 million 2
4.0 million to 4.8 million 0
3.6 million to 4.0 million 0
3.2 million to 3.6 million 1
2.8 million to 3.2 million 3
2.4 million to 2.8 million 0
2.0 million to 2.4 million 0
1.6 million to 2.0 million 1
1.2 million to 1.6 million 2
0.8 million to 1.2 million 0
Below 0.8 million 14
XV. Independent Non-executive Directors
The Company has received from each of the independent non-executive Directors a confirmation of independence for the
year pursuant to Rule 3.13 of the Hong Kong Listing Rules and considered all of the independent non-executive Directors to
be independent during the year.
48 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VI Directors’ Report
XVI. Securities interests held by Directors, Supervisors and Chief Executives
As at 31 December 2020, interests of the Company or its associated corporations (within the meaning of Part XV of SFO)
held by each of the Directors, Supervisors and Chief Executives of the Company under section 352 of the SFO are set out
as follows:
Associated corporations
Number of shares
(A shares) held as
at the end of the
reporting period
Name Position (shares)
Directors
Chen Hongguo (Note 1) Chairman 31,080,044
Hu Changqing Executive Director and Vice Chairman 5,042,857
Li Xingchun Executive Director and Vice Chairman 5,000,000
Li Feng Executive Director and General Manager 3,906,027
Han Tingde Non-executive Director –
Li Chuanxuan Non-executive Director –
Sun Jianfei Independent non-executive Director –
Yin Meiqun Independent non-executive Director –
Yang Biao Independent non-executive Director –
Supervisors
Li Kang Supervisor 149,300
Pan Ailing Supervisor –
Zhang Hong Supervisor –
Li Xinggui Supervisor –
Qiu Lanju Supervisor –
Associated corporations
Number of Number of
shares held at shares held
the beginning at the end of
Name of associated of the reporting Change during the reporting
Name Position corporations period (shares) the period +/- period (shares)
Chen Hongguo Chairman Shouguang Henglian 231,000,000 – 231,000,000
Enterprise Investment
Co. Ltd. (Note 2)
Note 1: Save for the 31,080,044 A shares held personally, Chen Hongguo is deemed to be interested in the 3,861,322 A shares held by his spouse,
Li Xueqin.
Note 2: Chen Hongguo and his spouse, Li Xueqin, collectively hold 76.79% equity interests in Shouguang Henglian Enterprise Investment Co.
Ltd., (hereinafter referred to as “Shouguang Henglian”), as a result, Shouguang Henglian is deemed to be controlled by Chen Hongguo. As
a result, the 231,000,000 shares in Chenming Holdings (approximately 18.65% of the total share capital of Chenming Holdings) held by
Shouguang Henglian is also deemed to be held by Chen Hongguo.
2020 ANNUAL REPORT 49
VI Directors’ Report
XVI. Securities interests held by Directors, Supervisors and Chief Executives (Cont’d)
Save as disclosed above, as at 31 December 2020, none of the Directors, Supervisors or chief executives of the Company
had any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated
corporations which were required to be filed in the register of the Company required to be maintained pursuant to section
352 of the SFO or which were required to be notified to the Company and Hong Kong Stock Exchange pursuant to the
Model Code for Securities Transactions by Directors of Listed Issuers as contained in Appendix 10 to the Rules Governing
the Listing of Securities on Hong Kong Stock Exchange (hereinafter referred to as the “Hong Kong Listing Rules”).
As at 31 December 2020, none of the Directors, Supervisors or chief executives or their respective spouses or children
under the age of 18 held or exercised any rights to subscribe for the share capital or debentures of the Company or its
associated corporations.
XVII. Interests and short position of substantial shareholders in shares and underlying shares
As at 31 December 2020, the following shareholders (other than the Directors, Supervisors or chief executives of the
Company) had interests or short positions in the Company’s shares and underlying shares as shown in the share register
maintained by the Company in accordance with Section 336 of the SFO (Chapter 571 of the Laws of Hong Kong):
Approximate shareholding
Number of as a percentage of
shares held Total share Class of
Name (shares) capital (%) shares (%)
Chenming Holdings Co., Ltd. 457,322,919 15.32 26.14
A shares (L)
Chenming Holdings (Hong Kong) Limited 210,717,563 7.06 29.83
B shares (L)
Chenming Holdings (Hong Kong) Limited 153,414,000 5.14 29.04
H shares (L)
(L) – Long position (S) – Short position (P) – Lending pool
Save as disclosed above, as at 31 December 2020, no other person had interests or short positions in the Company’s
shares or underlying shares as recorded in the register maintained under section 336 of the SFO.
XVIII. Relationship with employees, customers and suppliers
Please refer to “V. Personnel of the Company” under section X “Directors, Supervisors and Senior Management and Staff”, 2.
(8) Sales to major customers and major suppliers” of “II. Analysis of principal operations” under section V “Discussion and
Analysis of Operations” for details of the relationship between the Company and its employees, customers and suppliers.
XIX. Directors’ interests in material contracts and indemnity provision
None of the Company or any of its subsidiaries entered into any material contracts, in which Directors had significant
interests (either directly or indirectly), that subsisted at the end of the financial year or at any time during the reporting
period. The Company did not have any indemnity provision in favour of any Director.
50 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VI Directors’ Report
XX. Interests in competing business
None of the Directors or controlling shareholders of the Company was interested in any business which competes or is
likely to compete with the businesses of the Company and any of its subsidiaries.
XXI. Directors’ rights to purchase shares or debentures
As considered and approved at the 2020 second extraordinary general meeting, the 2020 first class meeting for holders
of domestic-listed shares and the 2020 first class meeting for holders of overseas-listed shares of the Company held on
15 May 2020, the Company implemented the 2020 restricted A share incentive scheme. As considered and approved at
the tenth extraordinary meeting of ninth session of the Board and the fifth extraordinary meeting of the ninth session of
the Supervisory Committee of the Company held on 29 May 2020, an aggregate of 79.6 million restricted A shares were
granted to 111 participants. In particular, Mr. Chen Hongguo, Mr. Hu Changqing, Mr. Li Xingchun and Mr. Li Feng, all being
Directors, were granted 20 million shares, 5 million shares, 5 million shares and 3 million shares, respectively.
Save for the above, during the year, neither was the Company nor any of its subsidiaries a party to any arrangements to
enable the Directors to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any
other body corporate.
XXII. Preference shares
Please refer to section IX “Preference Shares” for details of the issue of Preference Shares of the Company.
XXIII. Management contracts
No contracts concerning the management and administration of the whole or any substantial part of the business of the
Company were entered into or existed in 2020.
XXIV. Major risk factors
Please refer to “(V) Risk factors likely to be faced and the measures to be taken” of “IX. Outlook on the future development
of the Company” under section V “Discussion and Analysis of Operations” for details of major risk factors of the Company.
XXV. Material matters
Please refer to section VII “Material Matters” for details of material matters of the Company.
XXVI. Future development
Please refer to “(I) Competition overview and development trend of the industry”, “(II) Development strategy”, “(III) Operating
plan for 2021” and “(IV) Future capital requirements and source of funds” of “IX. Outlook on the future development of the
Company” under section V “Discussion and Analysis of Operations” for details of future development of the Company.
XXVII. Environment, social and governance report and social responsibility
Please refer to XVIII. Fulfilment of Social Responsibility under section VII “Material Matters” for details of fulfilment of social
responsibility. Please refer to the environment, social and governance report as required by the Hong Kong Listing Rules,
which will be issued separately by the Company before 29 June 2021.
XXVIII. Purchase, sale and redemption of shares
The Company and its subsidiaries did not purchase, sell or redeem any listed securities of the Company during the reporting
period.
2020 ANNUAL REPORT 51
VI Directors’ Report
XXIX. Sufficiency of public float
During the reporting period, based on the information that is publicly available to the Company and within the knowledge of
the Directors, the Company has maintained a sufficient prescribed amount of public float as required under the Hong Kong
Listing Rules.
XXX. Review of the Audit Committee
The audited consolidated financial statements of the Company for the year ended 31 December 2020 has been reviewed by
the Audit Committee of the Company.
XXXI. Gearing ratio
As at 31 December 2020, the Company’s gearing ratio (including minority interest) was 60.87%, representing a decrease of
1.29 percentage points from 62.16% for 2019.
The ratio was calculated as: total borrowings/total assets (whereas total borrowings represent borrowings due within one
year, borrowings due after one year, short-term commercial paper and medium and long-term notes and others).
XXXII. Going Concern Basis
The Company is a large conglomerate principally engaged in pulp production and paper making with synergistic
development in finance, forestry, logistics and construction materials. It is also the first company in the paper making
industry to own a financial company. The Group has production bases in Shandong, Guangdong, Hubei, Jiangxi, Jilin and
others, which deliver annual pulp and paper production capacity of over 11,000,000 tonnes, and is a large integrated pulp
and paper enterprise in China that achieves a balance of pulp production and paper making.
The Company has good sustainable profitability. In 2020, the Company achieved revenue of RMB30,737 million, net profit
of RMB1,906 million and net cash inflows from operating activities of RMB40,143 million. Meanwhile, the Company always
places emphasis on the interests of and return to shareholders, and has paid generous cash dividends for several years.
In compiling the accounts for the year ended 31 December 2020, the Directors have chosen and thoroughly applied the
appropriate accounting policies with due and reasonable judgement and estimates having been made, and prepared the
accounts on a going concern basis. The auditor of the Company has prepared the 2020 annual financial report on a going
concern basis, and has issued a standard unqualified audit opinion (see Financial Report section).
Therefore, the Board believes the Company has the ability to continue as a going concern.
XXXIII. Connected Transactions
1. The Issue and Grant of Restricted Shares under the Incentive Scheme
On 30 March 2020, the Board considered and approved the resolution in relation to the proposed adoption of the
Company’s incentive scheme. On 15 May 2020, the relevant resolution was considered and approved at the 2020
second extraordinary general meeting, the 2020 first class meeting for holders of domestic-listed shares and the 2020
first class meeting for holders of overseas-listed shares of the Company. The incentive scheme was thus approved
and became effective.
On 29 May 2020, the Board granted in aggregate 79.6 million restricted ordinary A shares to 111 participants under
the incentive scheme at a price of RMB2.85 per share. The participants included the Directors of the Company
(excluding independent Directors and external Directors), senior management, key technical (business) employees
and other persons who, in the opinion of the Board, are qualified. The restricted shares are subject to the lock-up
period and can only be unlocked for trading when the unlocking conditions under the incentive scheme are satisfied.
52 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VI Directors’ Report
XXXIII. Connected Transactions (Cont’d)
1. The Issue and Grant of Restricted Shares under the Incentive Scheme (Cont’d)
As some of the participants are the Directors and Senior Management of the Company and its subsidiaries, and,
accordingly, the connected persons of the Company, the issue and grant of restricted shares to those connected
persons of the Company under the incentive scheme will constitute a non-exempt connected transaction of the
Company.
The Board is of the view that the incentive scheme can help the Company to further establish and improve its long-
term incentive mechanism, attract and retain talented individuals, fully mobilise the enthusiasm of Directors, senior
management, core technical (business) backbone staff and other employees of the Company, bond the interests of
Shareholders, the Company and core individuals together effectively, help various parties to attend to the long-term
development of the Company and improve operational efficiency. It also reflects the ongoing support to the Group
from the related employees and the recognition to their contribution to the long-term growth and development of the
Group. The Board is of the view that the terms and conditions of the incentive scheme are on normal commercial
terms, fair and reasonable and in the interests of the Company and the shareholders as a whole.
For details, please refer to “XV. Implementation of the equity incentive plan, employee shareholding plan or other
employee incentive measure of the Company” under section VII “Material Matters” of this annual report and the
Company’s announcement dated 30 March 2020 and published on 31 March 2020 before trading hours, the circular
dated 29 April 2020, the overseas regulatory announcement dated 29 May 2020 and published on 1 June 2020 before
trading hours, and the overseas regulatory announcement dated 8 July 2020.
2. Acquisition of the Entire Equity Interests in Wuhan Chenming’s Shareholders Aberdeen and VNN
On 21 December 2020, the Company’s wholly-owned subsidiary Chenming (Overseas) Co., Ltd. (“Chenming
Overseas”), Yu Jianren, Yu Jianlong, Aberdeen Industrial Limited (“Aberdeen”) and VNN Holdings Limited (“VNN”)
entered into the Equity Transfer Agreement in respect of the acquisition of the entire equity interests in Wuhan
Chenming’s shareholders Aberdeen and VNN. In particular, Yu Jianren and Yu Jianlong are both natural persons of
PRC nationality, while Aberdeen and VNN are both limited liability companies incorporated in the British Virgin Islands
with their business being investment holding. Pursuant to the agreement, (i) Yu Jianren agreed to sell and Chenming
Overseas agreed to purchase the entire equity interest in Aberdeen at a cash consideration of RMB312.6 million; (ii)
Yu Jianlong agreed to sell and Chenming Overseas agreed to purchase the entire equity interest in VNN at a cash
consideration of RMB97.4 million.
Prior to the Acquisition, (i) Yu Jianren held the entire equity interest in Aberdeen, and Aberdeen held 26.41% of the
equity interest in Wuhan Chenming, a non-wholly-owned subsidiary of the Company; (ii) Yu Jianlong held the entire
equity interest in VNN, and VNN held 8.32% of the equity interest in Wuhan Chenming; and (iii) the Company held
65.21% of the equity interest in Wuhan Chenming. After the completion of the Acquisition, the Company will indirectly
own the entire equity interests in Aberdeen and VNN, and the Group will own in aggregate 99.85% of the equity
interest in Wuhan Chenming. Aberdeen and VNN will become wholly-owned subsidiaries of the Company.
As Yu Jianren, through its wholly-owned subsidiary Aberdeen, holds 26.41% of the equity interest in Wuhan
Chenming, a non-wholly-owned subsidiary of the Company, before the Acquisition, Aberdeen is a substantial
shareholder of Wuhan Chenming and Yu Jianren is an associate of Aberdeen. Therefore, Yu Jianren is a connected
person of the Company at the subsidiary level.
2020 ANNUAL REPORT 53
VI Directors’ Report
XXXIII. Connected Transactions (Cont’d)
2. Acquisition of the Entire Equity Interests in Wuhan Chenming ’s Shareholders Aberdeen and VNN
(Cont’d)
The Board considers that the acquisition of the entire equity interests in the Target Companies by the Company
through Chenming Overseas, thereby realising the acquisition of the minority interest in Wuhan Chenming, will help
strengthen the Company’s operation and management of Wuhan Chenming, ensure the continuous and stable
operation of Wuhan Chenming, and further integrate the resources of the Group’s principal businesses, which will
help enhance the Company’s profitability and comprehensive competitiveness and maximise economic benefits. The
Board considers that Equity Transfer Agreement and the terms of the Acquisition are fair and reasonable, on normal
commercial terms or better and in the interests of the Company and its shareholders as a whole.
For details, please refer to the Company’s announcements dated 21 December 2020 and 8 January 2021.
Unless otherwise stated, capitalised terms used in the section “2. Acquisition of the Entire Equity Interests in Wuhan
Chenming’s Shareholders Aberdeen and VNN” shall bear the same meanings as those defined in the announcement
dated 21 December 2020.
Save as disclosed above, the Company had no other connected transactions during the year.
XXXIV. Major Investment, Acquisition and Disposal
During the year ended 31 December 2020, the Group entered into the following major transaction agreements.
1. Entering into of Limited Partnership Agreement for the Establishment of Dingkun Asset
On 23 December 2020, Jinan Hengzhen Investment Management Co., Ltd. (as the general partner), Jiangxi
Chenming Paper Co., Ltd. (as a limited partner) and Wuhan Chenming Hanyang Paper Holdings Co., Ltd. (as a limited
partner) have entered into a partnership agreement for the establishment of Shandong Dingkun Asset Management
Partnership (Limited Partnership) (“Dingkun Asset”). After the establishment of Dingkun Asset, it will become a
subsidiary of the Company, and the Company will hold a total of 99.90% of subscribed capital in Dingkun Asset, the
financial information of which will be consolidated into the consolidated statements of the Group. For details, please
refer to the announcement of the Company dated 24 December 2020.
2. Entering into of Limited Partnership Agreement for the Establishment of Changjiang Chenming Equity
Investment Fund
On 23 December 2020, Hubei Huanggang Chenming Equity Investment Fund Management Co., Ltd. (as the general
partner) has entered into a partnership agreement with Hubei Changjiang (Huanggang) Industrial Investment
Fund Partnership (Limited Partnership) and Zhanjiang Chenming Paper Pulp Co., Ltd. (as limited partners) for the
establishment of Changjiang Chenming Equity Investment Fund. After the establishment of Changjiang Chenming
Equity Investment Fund, its financial information will be consolidated into the consolidated statements of the Group.
Changjiang Chenming Equity Investment Fund focuses on investing in papermaking and related industries, including
subscription of the newly-increased registered capital of Huanggang Chenming of RMB2 billion for the Huanggang
Chenming Phase II Project. For details, please refer to the announcement of the Company dated 24 December 2020.
54 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
I. Profit distribution for ordinary shares of the Company and conversion of capital reserves into
share capital
Formulation, implementation or adjustment of profit distribution policy for ordinary shares, especially the cash dividend
during the reporting period
√ Applicable Not applicable
The Company implemented its profit distribution policy in strict compliance with the Articles of Association. Its cash
dividend policy was formulated and implemented in compliance with the requirements of the Articles of Association and the
resolution of the general meeting with well-defined and clear dividend distribution criteria and proportion. The legal interests
of the small shareholders were fully protected as the related decision-making process and mechanism were in place,
the duties of independent Directors were well-defined so that they played a role, and the small shareholders were given
opportunities to sufficiently voice their opinion and make requests.
Implementation of the 2019 profit distribution plan for ordinary shareholders: Based on the number of the ordinary shares as
at the dividend distribution registration date of 2,984,208,200 shares, a cash dividend of RMB1.465828 (tax inclusive) was
paid to ordinary shareholders for every 10 shares held and there was no increase of share capital from reserves. The total
cash dividend distributed amounted to RMB437,433,593.74. The dividend distribution was implemented and completed on
18 August 2020. For details, please refer to the Dividend Adjustment and Payment of Final Dividend and Withholding and
Payment of Enterprise Income Tax for Non-resident Enterprise Shareholders published on Hong Kong Stock Exchange on 5
August 2020 and 10 August 2020, respectively, and the Announcement on the Implementation of the 2019 Profit Distribution
Plan for A Shares and B Shares published on CNINFO on 11 August 2020.
Particulars of Cash Dividend Policy
Was it in compliance with the requirements of the Articles of Association and the resolutions of
the general meeting? Yes
Were the dividend distribution criteria and proportion well-defined and clear? Yes
Were the related decision-making process and mechanism in place? Yes
Did independent Directors fulfil their duties and play their role? Yes
Were the minority shareholders given opportunities to sufficiently voice their opinion and
make requests and were the legal interests of the minority shareholders fully protected? Yes
Were conditions and procedures legal and transparent in respect of cash dividend policy
with adjustments and changes? Yes
The dividend distribution plans for ordinary shares (proposed) and the proposals on conversion of capital reserves into
share capital (proposed) over the past three years (the reporting period inclusive)
(1) The 2020 profit distribution plan for ordinary shares
On 25 March 2021, the Company convened the eighth meeting of the ninth session of the Board, at which the
proposed 2020 profit distribution plan was considered and approved. Based on the total number of ordinary shares
of the Company as at the end of 2020 of 2,984,208,200 shares, a cash dividend of RMB1.85 (tax inclusive) was to be
paid to ordinary shareholders for every 10 shares held. No bonus shares would be issued and there was no increase of
share capital from reserves. The cash dividend distributed to ordinary shareholders amounted to RMB552,078,517.00.
In the event of changes in the total share capital of the Company before the dividend distribution registration date, the
total profits distribution shall remain unchanged while the percentage of allocation will be adjusted accordingly.
2020 ANNUAL REPORT 55
VII Material Matters
I. Profit distribution for ordinary shares of the Company and conversion of capital reserves into
share capital (Cont’d)
(2) The 2019 profit distribution plan for ordinary shares
On 19 June 2020, the Company convened the 2019 general meeting, at which the proposed 2019 profit distribution
plan was considered and approved. Based on the total number of ordinary shares of the Company as at the end of
2019 of 2,904,608,200 shares, a cash dividend of RMB1.5 (tax inclusive) was to be paid to ordinary shareholders for
every 10 shares held. No bonus shares would be issued and there was no increase of share capital from reserves. The
cash dividend distributed to ordinary shareholders amounted to RMB435,691,230 (tax inclusive).
Between the disclosure and implementation of the Company’s 2019 profit distribution plan, the Company carried out
the 2020 Restricted A Share Incentive Scheme, pursuant to the Company issued an additional 79,600,000 A shares
which were listed on 15 July 2020, increasing the total ordinary share capital of the Company to 2,984,208,200
shares. In accordance with the principle of “fixed amount of cash dividends, bonus shares and conversion of capital
reserves into share capital” stipulated by the Guidelines for the Standardised Operation of Companies Listed on
the Shenzhen Stock Exchange ( ), the Company has adjusted the amount
of dividend per share under the 2019 profit distribution plan as such: based on the latest total number of ordinary
shares of the Company of 2,984,208,200 shares, a cash dividend of RMB1.465828 (tax inclusive) was to be paid to
ordinary shareholders for every 10 shares held. The cash dividend distributed to ordinary shareholders amounted to
RMB437,433,593.74 (tax inclusive).
(3) The 2018 profit distribution plan for ordinary shares
On 11 June 2019, the Company convened the 2018 annual general meeting, at which the 2018 profit distribution plan
was considered and approved: based on the number of the shares as at the end of 2018 of 2,904,608,200 shares, a
cash dividend of RMB2.4 (tax inclusive) was to be paid to all ordinary shareholders for every 10 shares held. The total
cash dividend distributed to ordinary shareholders amounted to RMB697,105,968 (tax inclusive).
Cash dividends for ordinary shares of the Company over the past three years (the reporting period inclusive)
Unit: RMB
Total cash
Ratio of cash dividend
Dividends (including
Amount of distribution through other
Net profit cash dividend through other means) as
attributable as a percentage means in a percentage
to ordinary of net profit net profit of net profit
shareholders of attributable attributable attributable
the Company to ordinary Amount of to ordinary to ordinary
in the shareholders of cash dividends shareholders of shareholders of
consolidated the Company distribution the Company Total cash the Company
financial in the through other in the dividend in the
Amount of statements consolidated means such consolidated (including consolidated
Year of cash dividends during the year financial as share financial through other financial
distribution (tax inclusive) of distribution statements repurchase statements means) statements
2020 552,078,517.00 1,712,029,078.52 32.25% 0.00 0.00% 552,078,517.00 32.25%
2019 437,433,593.74 1,656,566,584.88 26.41% 0.00 0.00% 437,433,593.74 26.41%
2018 697,105,968.00 2,509,828,858.47 27.78% 0.00 0.00% 697,105,968.00 27.78%
56 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
I. Profit distribution for ordinary shares of the Company and conversion of capital reserves into
share capital (Cont’d)
(3) The 2018 profit distribution plan for ordinary shares (Cont’d)
The Company made a profit and had positive retained profit available for ordinary shareholders of parent company
during the reporting period without cash dividend for ordinary shares being proposed
Applicable √ Not applicable
II. Profit distribution and conversion of capital reserves into share capital during this reporting
period
√ Applicable Not applicable
Numbers of bonus share per 10 shares (share(s)) 0
Dividend distribution per 10 shares (RMB) (tax inclusive) Cash dividend of RMB1.85 (tax inclusive) per 10 shares
to ordinary shareholders and cash dividend of RMB1.85
(tax inclusive) per 10 simulated shares converted from
Preference Shares into ordinary shares to holders of the
second and third tranches of Preference Shares
Conversion per 10 shares (share(s)) 0
Share base of the distribution proposal (shares) 2,984,208,200 ordinary shares and 589,005,236 simulated
shares converted from the second and third tranches of
Preference Shares on a conversion ratio of 1 Preference
Share valued at RMB3.82; the share base of the distribution
proposal was 3,573,213,436 shares.
Cash dividend (RMB) (tax inclusive) 661,044,485.66
Amount of cash dividend distribution through other means 0
such as share repurchase (RMB)
Total cash dividend including other means (RMB) 661,044,485.66
Distributable profits (RMB) 9,999,764,028.74
Percentage of cash dividend (including other means) to 100%
total profits distribution
Cash dividend policy
For profit distribution of companies which are fully developed with significant capital expenditure arrangement, the
percentage for cash dividend shall represent at least 40% of the profits distribution for the current year
2020 ANNUAL REPORT 57
VII Material Matters
II. Profit distribution and conversion of capital reserves into share capital during this reporting
period (Cont’d)
Particulars of profit distribution and conversion of capital reserves into share capital
The audited consolidated net profit attributable to shareholders of the Company for 2020 prepared in accordance with
Accounting Standards for Business Enterprises by the Company amounted to RMB1,712,029,078.52. When deducting the
interest on Perpetual Bonds of RMB171,776,438.36 and fixed dividend on Preference Shares of RMB214,425,000.00 for
2020, the distributable profit realised for 2020 amounted to RMB1,325,827,640.16.
In accordance with the requirements of the Articles of Association and the Prospectus of Non-public Issuance of Preference
Shares, based on the total ordinary share capital of 2,984,208,200 shares and the 589,005,236 simulated ordinary
shares converted from the second and third tranches of Preference Shares using a conversion ratio of 1 share valued at
RMB3.82as at the end of 2020, a cash dividend of RMB1.85 (tax inclusive) per 10 shares will be distributed to ordinary
shareholders; a cash dividend of RMB1.85 (tax inclusive) per 10 simulated ordinary shares converted from the Preference
Shares will be distributed to holders of the second and third tranches of Preference Shares. No bonus shares will be issued
and there is no increase of share capital from reserves. A cash dividend of RMB552,078,517.00 will be distributed to
ordinary shareholders and a variable cash dividend of RMB108,965,968.66 will be distributed to holders of the second and
third tranches of Preference Shares. In other words, a cash dividend of RMB4.84 (tax inclusive) per Preference Share with a
nominal value of RMB100 each will be distributed to holders of the second and third tranches of Preference Shares. In the
event of changes in the total share capital of the Company before the dividend distribution registration date, the total profits
distribution shall remain unchanged while the percentage of allocation will be adjusted accordingly.
58 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
III. Performance of undertakings
1. Undertakings made by parties involved in undertakings including the Company ’s beneficial controllers,
shareholders, related parties, bidders and the Company during the reporting period or prior periods
but subsisting to the end of the reporting period
√ Applicable Not applicable
Particulars
Party involved Type of Undertaking on the
Undertaking in undertaking undertaking Details of undertaking date Term performance
Undertaking on
shareholding structure
reformation
Undertaking made in
offering documents
or shareholding
alternation documents
Undertaking made during
asset reconstruction
Undertaking made on Chenming Non-competitive (1)Chenming Holdings Co., Ltd. (“Chenming Holdings”) shall not engage, whether 22 May 2008 During the Implementing
initial public offering or Holdings undertaking solely, jointly, or by representing itself or any other persons or companies, and shall period when as normal
refinancing Co., Ltd not procure its associates (as defined in The Listing Rules of Hong Kong Stock Chenming
Exchange) to engage, in any business which competes with the business of the Holdings
Company and its subsidiaries (“Chenming Group” or “we”) directly or indirectly, in was the
any country and region which our business exists (or any part of the world if in any major
form of electronics business), or in any business that directly or indirectly competes shareholder
with Chenming Group’s business which we operate from time to time (including of the
but not limited to any business in the form of sole proprietorship, joint ventures Company
or acquisitions, or holding interests directly or indirectly in such enterprises, or
by any other means); (2) in the event that Chenming Holdings is required by its
business to, whether solely, jointly, or by representing itself or any other persons or
companies, engage in business which directly or indirectly competes against the
business of Chenming Group, or obtain any business opportunity which directly or
indirectly competes against the business of Chenming Group, it shall endeavour
to procure that Chenming Group shall have priority to obtain the right to operate
such business or to obtain such business opportunity; (3) if Chenming Holdings is
in breach of the abovementioned undertakings, it shall indemnify the Company for
any loss caused by such breach and the Company shall have the right to acquire
all businesses of Chenming Holdings, which directly or indirectly compete with
the businesses of our Group, at market price or cost price (whichever price is
lower); (4) Chenming Holdings shall not make use of its position as the controlling
shareholder (as defined in The Listing Rules of Hong Kong Stock Exchange) of our
Group to jeopardise the legal interests of Chenming Group and its shareholders
with other persons or companies or on their behalf.
2020 ANNUAL REPORT 59
VII Material Matters
III. Performance of undertakings (Cont’d)
1. Undertakings made by parties involved in undertakings including the Company ’s beneficial controllers,
shareholders, related parties, bidders and the Company during the reporting period or prior periods
but subsisting to the end of the reporting period (Cont’d)
Particulars
Party involved Type of Undertaking on the
Undertaking in undertaking undertaking Details of undertaking date Term performance
Chenming Defective (1) According to the plan on defective properties of the Company, Chenming Holdings 16 January During the Implementing
Holdings properties Co., Ltd. (“Chenming Holdings”) has guaranteed and undertaken that: according to 2008 period when as normal
Co., Ltd. the application of the Company, for defective property(ies) owned by the Company Chenming
and its holding subsidiary company which situated in the administrative area of Holdings
Shouguang city, Chenming Holdings will purchase it (them) and have it(them) was the
being transferred to itself pursuant to the law in accordance with the result of the major
related asset valuation if the Company decides to transfer and dispose of it(them) shareholder
and there is no other transferee; (2) before the Company transfers and disposes of of the
the defective properties pursuant to the law, if the Company suffers any economic Company
losses due to the defects of the title (including but not limited to damages,
penalties and relocation costs), Chenming Holdings will bear such economic
losses; (3) during the regulatory process taken to the defective properties of
buildings and land of subsidiaries of the Company situated outside the local areas
(outside the administrative area of Shouguang city), the economic losses such as
penalties or relocation costs imposed by competent administrative authorities to
be borne by the subsidiaries arising from defects of insufficient title documents
shall be paid pursuant to the law by Chenming Holdings after verification.
Shandong Specific remedial In view of the impacts on dilution of current returns for ordinary shareholders 25 March 2016 9999-12-31 Implementing
Chenming measures for under the Preference Shares issuance, and in order to implement the Notice of as normal
Paper non-public the General Office of the State Council on Further Strengthening Protection of
Holdings issuance of the Lawful Rights of Small Investors in Capital Markets, protect the interests of
Limited Preference ordinary shareholders and provide remedies for the possible dilution on current
Shares returns as a result of Preference Shares issuance, the Company has undertaken
that it will implement various measures to ensure the effective utilisation of
proceeds raised, which can prevent dilution on current returns effectively, thereby
enhancing future returns.
Equity incentive
undertakings
Whether undertakings Yes
performed on time
2. Description on the Company’s assets and items in meeting original profit forecast and its explanation
as there is profit forecast for assets and items of the Company and the reporting period is still within
the profit forecast period
Applicable √ Not applicable
60 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
IV. Appropriation of funds of the Company by the controlling shareholder and its related parties
for non-operating purposes
Applicable √ Not applicable
There was no appropriation of funds of the Company by the controlling shareholder and its related parties for non-operating
purposes during the reporting period.
V. Opinions of the Board, the Supervisory Committee and independent Directors (if any)
regarding the “modified auditor’s report” for the reporting period issued by the accountants
Applicable √ Not applicable
VI. Reason for changes in accounting policies, accounting estimates and accounting methods
as compared to the financial report for the prior year
√ Applicable Not applicable
The Company has been implementing the Accounting Standard for Business Enterprises No. 13 promulgated by the
Ministry of Finance since 1 January 2020, for which the prospective application method is applied.
VII. Reason for retrospective restatement to correct major accounting errors during the reporting
period
Applicable √ Not applicable
There were retrospective restatements to correct major accounting errors of the Company during the reporting period.
VIII. Reason for changes in scope of the consolidated financial statements as compared to the
financial report for the prior year
√ Applicable Not applicable
During the reporting period, the scope of consolidation had 8 newly established subsidiaries, namely Chenming (Overseas)
Co., Ltd., Chenming (Singapore) Co., Ltd., Qingdao Chenming Import and Export Trade Co., Ltd., Hainan Chenming
Technology Co., Ltd., Hubei Changjiang Chenming Huanggang Equity Investment Fund Partnership (Limited Partnership),
Hubei Huanggang Chenming Equity Investment Fund Management Co., Ltd., Shandong Dingkun Asset Management
Partnership (Limited Partnership) and Huanggang Chenming Paper Technology Co., Ltd. During the year, one subsidiary
was consolidated without constituting business, namely Shanghai Herui Investment Co., Ltd.; and one subsidiary was
incorporated via acquisition, namely Kunshan Tuoan Plastic Products Co., Ltd.
During the reporting period, 3 companies were reduced from the scope of consolidation: Shandong Chenming Paper Group
(Fuyu) Sales Co., Ltd. was absorbed and consolidated into the Company, while Qingdao Chenming International Logistics
Co., Ltd. and Shouguang Chenming Industrial Logistics Co., Ltd. were disposed as to 100% equity interest. Accordingly,
such companies were excluded from the scope of consolidation.
2020 ANNUAL REPORT 61
VII Material Matters
IX. Engagement or dismissal of accounting firms
Current accounting firm engaged
Name of the domestic accounting firm Grant Thornton
(Special General Partnership)
Remuneration of the domestic accounting firm (RMB’ 0,000) 330
Continued term of service of the domestic accounting firm 2
Name of certified public accountants of the domestic accounting firm Liu Jian and Jiang Lei
Continued term of service of certified public accountants of the domestic accounting firm 1
Whether to appoint another accounting firm during the period
Yes √ No
Particulars on recruitment of accounting firms, financial consultants or sponsors for internal control and auditing purposes
√ Applicable Not applicable
During the year, the Company engaged Grant Thornton (Special General Partnership) as the auditor for internal control of
the Company for 2020. The Company paid RMB800,000 as internal control audit fees during the period. The Company
engaged Shanghai Realize Investment Consulting Co., Ltd. as its financial advisor due to the implementation of 2020
Restricted A Share Incentive Scheme. The Company paid RMB500,000 as financial advisory fees during the period.
X. Suspension in trading or delisting upon publication of annual report
Applicable √ Not applicable
XI. Matters related to bankruptcy and reorganisation
Applicable √ Not applicable
There was no matter related to bankruptcy and reorganisation during the reporting period.
62 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
XII. Material litigation and arbitration
√ Applicable Not applicable
General information Whether
on the litigation Amount involved provisions Enforcement Date of
(arbitration) (RMB’0,000) are made Progress Trial results and impact of judgment disclosure Disclosure index
Statutory demand HK$389,112,432.44 Yes 1. The Company appealed 1. On 5 August 2020, the Court of Not applicable 19 August 2020 http://www.cninfo.com.cn
and winding-up against the order of Justice Appeal of the High Court of the and 22 August
petition Harris dated 14 June 2017 HKSAR made the judgment to 2020
on 12 July 2017. The hearing dismiss the appeal of the Company.
was completed at the Court
of Appeal of the High Court 2. On 5 August 2020, the Hong
of the HKSAR on 11 May Kong International Arbitration
2018. At the conclusion of the Centre made the final ruling as
hearing, the court indicated follows: HKK2 is in possession
that a date will be set to and control of the accounting
hand down the judgment. books and records of the joint
On 5 August 2020, the Court venture. HKK2 shall transfer the
of Appeal of the High Court accounting books and records of
of the HKSAR made the the joint venture to the compulsory
judgment to dismiss the liquidation group of the joint
appeal of the Company. venture, namely the Shandong
branch of Yongtuo Certified Public
2. On 9 October 2018, Accountants (Special General
the Company served Partnership), within 21 days
an arbitration notice to from the date of final ruling (i.e. 5
Arjowiggins HKK2 Limited August 2020). Security for costs
(“HKK2”) in respect of under the custody of Hong Kong
controversies over the joint International Arbitration Centre
venture established by shall be returned to the Company.
the Company and HKK2, Both parties shall split the
requesting HKK2 to return arbitration costs other than legal
the accounting books and representation and assistance fees.
relevant records of the joint
venture, and compensate
for the arbitration costs. On
5 August 2020, the Hong
Kong International Arbitration
Centre made the final ruling.
2020 ANNUAL REPORT 63
VII Material Matters
XIII. Punishment and rectification
√ Applicable Not applicable
Investigation
and punishment
Name Type Reason type Conclusion, if any Disclosure date Disclosure index
Jiangxi Chenming Subsidiary Excessive discharge Environmental In the second half of 2019, Nanchang Ecological Environment Not applicable Not applicable
Paper Co., Ltd. of water pollutants penalties Bureau conducted routine environmental inspections to Jiangxi
and improper Chenming. As a result of excessive suspended solid concentration
sludge disposal at the at the main water drain of Jiangxi Chenming, the
Environmental Protection Bureau imposed three administrative
penalties to Jiangxi Chenming amounting to RMB1.203 million.
Prior to June 2018, Guo XX, Li XX and Tao XX undertook the
outward transportation of industrial solid waste, namely sludge,
produced in the course of Jiangxi Chenming’s production. Such
sludge was illegally dumped. The Intermediate People’s Court
of Nanchang Municipality, Jiangxi Province held that Jiangxi
Chenming as well as the four persons involved, including Pang XX,
had poor legal awareness. Jiangxi Chenming was negligent in the
environmental supervision of sludge disposal, and the business
undertakers failed to legally dispose of the sludge. As such, Jiangxi
Chenming was fined RMB3 million for polluting the environment.
Jiangxi Chenming has completed the process of harmless sludge
disposal and ecological restoration of the dumping location in
accordance with the time schedule and passed the inspections
by relevant governmental apartments and Jiangxi Environmental
Protection Expert Acceptance Review Committee. With compliant
waste water discharge and all penalties paid, Jiangxi Chenming
has resumed normal production and operation, and the incident
did not have any material impact on the Company’s profit for the
period or subsequent periods.
Zhanjiang Chenming Subsidiary Excessive discharge Environmental During an environmental protection inspection of Zhanjiang Chenming, Not applicable Not applicable
Pulp & Paper of water pollutants penalties Zhanjiang Ecological Environment Bureau found that the rainwater
Co., Ltd. discharge outlet of the rainwater channel in the Zhanjiang Chenming
factory area had excessive discharge of water pollutants. Therefore,
Zhanjiang Chenming was fined RMB1 million. As of the date of the
report, the above violation has been corrected and the fine has been
paid.
Rectification
√ Applicable Not applicable
64 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
XIII. Punishment and rectification (Cont’d)
1. Rectification measures of Zhanjiang Chenming
In light of the pollution, Zhanjiang Chenming thoroughly reflected its operations and immediately investigated the
cause of the incident and implemented accountability. To ensure that environmental issues are directly managed by
company leaders, a member of the management was designated to specifically address environmental protection
matters, which further replenished the manpower for environmental management. Zhanjiang Chenming also strictly
complied with the requirements under the Notice on Further Strengthening Environmental Management and
Protection ( ). It has adopted the following rectification measures:
(1) Sandbags and other means were used to prevent the outflow of water pollutants, which are recycled in the
sewage treatment system, and the rainwater gutter was thoroughly cleaned.
(2) Cleaning of the reservoir was immediately suspended to reconnect the sludge pipe directly to the sewage
system, forfeiting recycling through the rainwater gutter.
(3) Production of the causticisation section, where the green liquid tank was located, was immediately shut down
to build additional cofferdam and sewage backwater pump to the tank area, as well as building a valve to the
entrance where the green liquid flows to the main rainwater gutter.
(4) Repair was conducted on the recovery pump and the gate of the rainwater gutter, while adding another recovery
pump at the front of the gate equipped with emergency backup sandbags.
(5) Retrospective assessment was conducted on the existing contingency plan for environmental emergencies,
which has been filed.
(6) Environmental management systems such as the Rain and Sewage Separation Management System (
) were revised to enhance training and implementation. Patrolling is arranged from time to time to
strictly prohibit production wastewater from entering the rainwater collection system. Each chief officer of the
branch factories is responsible for such tasks, and an environmental management specialist is designated to
assist the chief officer in the environmental management of the branch.
(7) On 14 May 2020, a cooperation agreement was entered into with King & Wood Mallesons, the legal advisor
to the Ministry of Ecology and Environment, pursuant to which King & Wood Mallesons is entrusted to
comprehensively seek and locate existing environmental hazards within the Company from the perspective of
the Central Environmental Inspector and offer the most optimal solutions.
2020 ANNUAL REPORT 65
VII Material Matters
XIII. Punishment and rectification (Cont’d)
2. Rectification measures of Jiangxi Chenming
(1) Adjusted its water treatment technique, refined dosing operation, increased sludge press quality, and
established, among others, monitoring response mechanism for water quantity and water standard at the
middle water section designed to respond to changes in BTMP ingredient ratio and load. As a result, Jiangxi
Chenming proved qualified on all indicators during two spontaneous sampling inspections conducted by
Nanchang Ecological Environment Bureau and the environmental monitor station as well as a scheduled
sampling inspection conducted by a third party. Based on such results, Nanchang Ecological Environment
Bureau determined that the rectification for out-of-limit waste water (SS standard) of Jiangxi Chenming had
been completed.
(2) After installing 50 surface aerators at the south and north aeration tanks, Jiangxi Chenming further installed 10
jet aeration devices for both tanks in order to increase dissolved oxygen, and carried out in-depth technical
modifications to the aeration tanks to increase efficient jet aeration. All indicators were above-standard after
multiple sampling and monitoring.
(3) Immediately initiated harmless sludge disposal and ecological restoration of the dumping location in strict
compliance with the laws, regulations and government requirements. After vigorous efforts in reducing losses
and eliminating pollution, the harmless sludge disposal and ecological restoration processes have been
completed. Jiangxi Chenming has passed the inspections of relevant government departments and the joint
acceptance review committee consisting of environmental experts in Jiangxi Province, and the polluted land
has been declared unpolluted after on-site inspections by environmental protection departments.
(4) Strengthened the online inspection and monitoring system and the machine-controlled early warning system;
focused on improving the quality and training of full-time environmental protection management personnel at all
levels; strictly implemented the qualification standards and education on the environmental protection laws and
regulations, with regular appraisal and incentives to raise environmental awareness and sense of responsibility
across the board, with strict compliance with relevant laws and regulations.
XIV. Credibility of the Company, its controlling shareholders and beneficial controllers
Applicable √ Not applicable
66 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
XV. Implementation of the equity incentive plan, employee shareholding plan or other employee
incentive measure of the Company
√ Applicable Not applicable
1. On 30 March 2020, the ninth extraordinary meeting of the ninth session of the Board of the Company considered and
approved the Resolution in Relation to the 2020 Restricted Share Incentive Scheme of Shandong Chenming Paper
Holdings Limited (Draft) and Its Summary, the Resolution in Relation to the Assessment Management Measures for
the Implementation of the 2020 Restricted Share Incentive Scheme of Shandong Chenming Paper Holdings Limited,
and the Resolution in Relation to the Authorisation Granted by the General Meeting to the Board to Deal with Matters
Relating to the Share Incentive Scheme of the Company. On the same date, the fourth extraordinary meeting of the
ninth session of the Supervisory Committee of the Company considered and approved the above resolutions and
verified the list of proposed participants of the incentive scheme. Independent Directors of the Company issued
independent opinions on the incentive scheme.
2. On 3 April 2020, the Company announced the list of participants through the Company’s internal website for a period
from 3 April 2020 to 12 April 2020. During the period, the Supervisory Committee of the Company and relevant
departments did not receive any objection against the proposed participants. The Supervisory Committee verified the
list of participants under the grant of the incentive scheme.
3. On 15 May 2020, the Resolution in Relation to the 2020 Restricted Share Incentive Scheme of Shandong Chenming
Paper Holdings Limited (Draft) and Its Summary, the Resolution in Relation to the Assessment Management Measures
for the Implementation of the 2020 Restricted Share Incentive Scheme of Shandong Chenming Paper Holdings
Limited, and the Resolution in Relation to the Authorisation Granted by the General Meeting to the Board to Deal with
Matters Relating to the Share Incentive Scheme of the Company were considered and approved at the 2020 second
extraordinary general meeting, the 2020 first class meeting for holders of domestic-listed shares and the 2020 first
class meeting for holders of overseas-listed shares of the Company. On 16 May 2020, the Company disclosed the
Self-Examination Report for the Trading of Shares of the Company by Insiders and Participants of the 2020 Restricted
A Share Incentive Scheme.
4. On 29 May 2020, the Resolution on the Matters Relating to Adjustments to the 2020 Restricted A Share Incentive
Scheme of the Company and the Resolution in Relation to the Grant of Restricted Shares to the Participants were
considered and approved at the tenth extraordinary meeting of ninth session of the Board and the fifth extraordinary
meeting of the ninth session of the Supervisory Committee of the Company, approving the issue of 79,600,000
restricted A shares to 111 participants at the price of RMB2.85 per share on 29 May 2020. The independent Directors
of the Company issued independent opinions thereon, agreed that the Board shall make adjustments to the list of
proposed participants and the number of shares to be granted, and considered that the participants were legally and
validly qualified and that the grant date determined was in compliance with relevant requirements.
5. On 28 June 2020, Grant Thornton issued a Capital Verification Report (Zhi Tong Yan Zi (2020) No. 371ZC00199), in
which they verified the Company’s subscription contribution status for the share incentive scheme as of 23 June 2020,
and considered that:
6. On 15 July 2020, the 79,600,000 restricted A shares granted to the participants were listed.
For details, please refer to 2020 Restricted A Share Incentive Scheme (Draft), Assessment Management Measures
for the Implementation of the 2020 Restricted A Share Incentive Scheme, the Announcement on Approval of
2020 Restricted A Share Incentive Scheme by State-owned Assets Supervision and Administration Office of the
People’s Government of Shouguang City, the Announcement on Grant of Restricted Shares to Participants, and the
Announcement on Completion of Registration of the Grant under the 2020 Restricted A Shares Incentive Scheme
published on CNINFO on 31 March, 6 May, 8 May, 16 May, 30 May and 9 July 2020, respectively.
2020 ANNUAL REPORT 67
VII Material Matters
XVI. Significant related party transactions
1. Related party transactions associated with day-to-day operation
√ Applicable Not applicable
Percentage
Subject Pricing Related Amount of as the Amount of Whether Market price
Types of the matter of the basis of the party related party amount of transactions exceeding Settlement of of available
Related party related party related party related party transaction transactions similar approved approved related party similar Disclosure
Related party relationship transactions transactions transaction price (RMB’0,000) transactions (RMB’0,000) cap transactions transaction date Disclosure index
Jiangxi Jiuyu Director and Senior Procurement Natural gas, Market price Market price 25,516 64.45% 60,000 No Bank Not applicable 30 March 2020 http://www.cninfo.com.cn
Energy Co., Ltd. Management of the heavy oil, acceptance
Company served etc. and
as the director and telegraphic
senior management transfer
of the company
during the past
twelve months
Total – – 25,516 – 60,000 – – – – –
Particulars on refund of bulk sale None
Actual implementation during the reporting period of day-to-day related party transactions with estimated total None
amounts that would take place during the period, by category (if any)
Reason for the significant difference between transaction price and market reference price (if applicable) Not applicable
2. Related party transaction in connection with purchase or sale of assets or equity interest
Applicable √ Not applicable
There was no related party transaction of the Company in connection with purchase or sale of assets or equity interest
during the reporting period.
3. Related party transaction connected to joint external investment
Applicable √ Not applicable
There was no related party transaction of the Company connected to joint external investment during the reporting
period.
68 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
XVI. Significant related party transactions (Cont’d)
4. Related creditors’ rights and debts transactions
√ Applicable Not applicable
Were there any non-operating related creditors’ rights and debts transaction?
√ Yes No
Debts payable to any related party:
Amount Amount
increased recovered
during the during the Interest for
Opening current current the current Closing
Relationship with balance period period Interest period balance
Related party the Company Reason (RMB’0,000) (RMB’0,000) (RMB’0,000) rate (RMB’0,000) (RMB’0,000)
CHENMING HOLDINGS The controlling Financial 70,844.09 66,030.00 136,874.09 Market interest rate 756.32 0.00
COMPANY LIMITED shareholder of the support
Company
Guangdong Nanyue Bank An associate of the Borrowing 294,897.00 131,666.40 254,896.94 Market interest rate 9,677.43 171,666.46
Co., Ltd. Company
Effect of related debts on the operating results Financial support is provided by Chenming Holdings without requiring any pledge or guarantee, which is a testament
and financial position of the Company to its support and confidence in the future development of the Company, and helps the Company promote project
construction and satisfy its needs for working capital.
Creditor’s rights receivable from related parties
Amount Amount
Were there increased recovered
any during the during the Interest for
Relationship non-operating Opening current current the current Closing
with capital balance period period Interest period balance
Related party the Company Reason occupation (RMB’0,000) (RMB’0,000) (RMB’0,000) rate (RMB’0,000) (RMB’0,000)
Shouguang Meite A joint venture of Financial support No 0.00 1,630.72 0.00 6.00% 34.17 1,630.72
Environmental the Company
Technology Co., Ltd.
Weifang Sime Darby A joint venture of Financial support No 6,445.65 0.00 0.00 6.00% 401.96 6847.61
West Port Co., Ltd. the Company
Effect of related creditors’ rights on the operating The above creditors’ rights do not affect the ordinary operation of the Company. Moreover, they have catered to the
results and financial position of the Company needs for development of existing businesses of Shouguang Meite Environmental and Weifang Sime Darby West
Port and lowered the financing costs.
5. Other significant related party transactions
Applicable √ Not applicable
There was no other significant related party transaction of the Company during the reporting period.
2020 ANNUAL REPORT 69
VII Material Matters
XVII. Material contracts and implementation
1. Custody, contracting and leasing
(1) Custody
Applicable √ Not applicable
There was no custody of the Company during the reporting period.
(2) Contracting
Applicable √ Not applicable
There was no contracting of the Company during the reporting period.
(3) Leasing
Applicable √ Not applicable
There was no leasing of the Company during the reporting period.
2. Significant guarantees
√ Applicable Not applicable
(1) Guarantees
During the reporting period, the Company provided guarantee to subsidiaries and the guarantee amount
incurred was RMB7,697.6500, million. The subsidiaries provided guarantee to their subsidiaries and the
guarantee amount incurred was RMB1,044,3103 million.
As at 31 December 2020, the balance of the external guarantee provided by the Company (including the
guarantee to its subsidiaries by the Company and the guarantee provided to subsidiaries by subsidiaries)
amounted to RMB13,107.0798 million, representing 53.99% of the equity attributable to shareholders of the
Company as at the end of 2020.
70 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
XVII. Material contracts and implementation (Cont’d)
2. Significant guarantees (Cont’d)
(1) Guarantees (Cont’d)
There were no guarantees in violation of regulations.
Unit: RMB’ 0,000
External guarantees of the Company and its subsidiaries (excluding guarantees to subsidiaries
Date of the related Guarantee
Announcement to related
disclosing the Amount of Guarantee Type of Fulfilled parties
Name of obligee guarantee amount guarantee Guarantee date provided guarantee Term or not or not
Weifang Sime Darby 24 July 2017 17,500.00 20 December 2017 12,480.00 General 10 years No No
West Port Co., Ltd. guarantee
Zhanjiang Runbao 4 December 2020 16,000.00 4 December 2020 16,000.00 Pledge 2 years No No
Trading Co., Ltd.
Zhanjiang Dingjin 4 December 2020 13,558.19 4 December 2020 13,558.19 Pledge 2 years No No
Trading Co., Ltd.
Total external guarantees approved during 29,558.19 Total actual external guarantees during the reporting period (A2) 29,558.19
the reporting period (A1)
Total external guarantees approved at the 47,058.19 Balance of total actual guarantees at the end of the reporting period (A4) 42,038.19
end of the reporting period (A3)
2020 ANNUAL REPORT 71
VII Material Matters
XVII. Material contracts and implementation (Cont’d)
2. Significant guarantees (Cont’d)
(1) Guarantees (Cont’d)
Guarantees between the Company and its subsidiaries
Date of the related Guarantee
Announcement to related
disclosing the Amount of Guarantee Type of Fulfilled parties
Name of obligee guarantee amount guarantee Guarantee date provided guarantee Term or not or not
Zhanjiang Chenming 14 June 2018 200,000.00 12 July 2019 485,993.49 General 3 years No No
Pulp & Paper Co., Ltd. guarantee
Zhanjiang Chenming 30 March 2019 1,088,000.00 General 5 years No No
Pulp & Paper Co., Ltd. guarantee
Zhanjiang Chenming 27 March 2020 160,000.00 General 5 years No No
Pulp & Paper Co., Ltd. guarantee
Shandong Chenming 30 March 2019 500,000.00 General 5 years No No
Group Finance Co., guarantee
Ltd.
Shandong Chenming 30 March 2019 600,000.00 9 March 2020 120,372.86 General 5 years No No
Paper Sales Co., Ltd. guarantee
Shandong Chenming 26 March 2015 100,000.00 General 7 years No No
Financial Leasing Co., guarantee
Ltd
Shandong Chenming 30 March 2016 300,000.00 General 7 years No No
Financial Leasing Co., guarantee
Ltd
Shanghai Chenming 14 February 2018 50,000.00 General 3 years No No
Financial Leasing Co., guarantee
Ltd.
Qingdao Chenming 14 February 2018 50,000.00 General 3 years No No
Nonghai Financial guarantee
Leasing Co., Ltd.
Guangzhou Chenming 14 February 2018 50,000.00 General 3 years No No
Financial Leasing Co., guarantee
Ltd.
Shandong Chenming 14 February 2018 200,000.00 General 3 years No No
Commercial Factoring guarantee
Co., Ltd.
Huanggang Chenming 26 March 2015 400,000.00 5 January 2017 92,628.00 General 7 years No No
Pulp & Paper Co., Ltd. guarantee
Huanggang Chenming 30 March 2016 550,000.00 General 7 years No No
Pulp & Paper Co., Ltd. guarantee
Jiangxi Chenming Paper 14 June 2018 50,000.00 28 June 2019 164,253.48 General 3 years No No
Co., Ltd. guarantee
Jiangxi Chenming Paper 30 March 2019 350,000.00 General 5 years No No
Co., Ltd. guarantee
Shouguang Meilun 30 March 2019 100,000.00 9 July 2020 48,191.77 General 5 years No No
Paper Co., Ltd. guarantee
72 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
XVII. Material contracts and implementation (Cont’d)
2. Significant guarantees (Cont’d)
(1) Guarantees (Cont’d)
Guarantees between the Company and its subsidiaries
Date of the related Guarantee
Announcement to related
disclosing the Amount of Guarantee Type of Fulfilled parties
Name of obligee guarantee amount guarantee Guarantee date provided guarantee Term or not or not
Shouguang Meilun 27 March 2020 400,000.00 General 5 years No No
Paper Co., Ltd. guarantee
Wuhan Chenming 18 October 2019 100,000.00 6 August 2020 3,000.00 General 3 years No No
Hanyang Paper guarantee
Holdings Co., Ltd.
Chenming (HK) Limited 14 June 2018 250,000.00 23 April 2018 42,738.10 General 3 years No No
guarantee
Chenming (HK) Limited 30 March 2019 500,000.00 General 5 years No No
guarantee
Shouguang Chenming 30 March 2019 50,000.00 General 5 years No No
Import and Export guarantee
Trade Co., Ltd.
Jilin Chenming Paper 30 March 2019 150,000.00 16 March 2020 2,000.00 General 5 years No No
Co., Ltd. guarantee
Zhanjiang Chenming 30 March 2019 10,000.00 General 5 years No No
Arboriculture guarantee
Development Co., Ltd
Nanchang Chenming 27 March 2020 10,000.00 General 3 years No No
Arboriculture guarantee
Development Co., Ltd.
Shandong Chenming 14 June 2018 3,000.00 General 3 years No No
Panels Co., Ltd. guarantee
Shanghai Chenming 11 October 2018 400,000.00 General 3 years No No
Industrial Co., Ltd guarantee
Shanghai Chenming 30 March 2019 300,000.00 11 May 2020 1,500.00 General 5 years No No
Pulp & Paper Sales guarantee
Co., Ltd.
Shanghai Hongtai Real 27 March 2020 140,000.00 General 10 years No No
Estate Co., Ltd. guarantee
Shanghai Hongtai 27 March 2020 10,000.00 General 5 years No No
Property Management guarantee
Co., Ltd.
Chenming (Overseas) 27 March 2020 100,000.00 General 5 years No No
Co., Ltd. guarantee
Chenming (Singapore) 27 March 2020 100,000.00 General 5 years No No
Co., Ltd. guarantee
Hainan Chenming 4 December 2020 40,000.00 11 December 2020 38,000.00 General 3 years No No
Technology Co., Ltd. guarantee
Total amount of guarantee provided for 960,000.00 Total amount of guarantee provided for subsidiaries during the reporting period 769,765.00
subsidiaries approved during the reporting (B2)
period (B1)
Total amount of guarantee provided for 7,311,000.00.00 Total balance of guarantee provided for subsidiaries as at the end of the 998,677.70
subsidiaries approved as at the end of the reporting period (B4)
reporting period (B3)
2020 ANNUAL REPORT 73
VII Material Matters
XVII. Material contracts and implementation (Cont’d)
2. Significant guarantees (Cont’d)
(1) Guarantees (Cont’d)
Guarantees between subsidiaries
Date of the related Guarantee
Announcement to related
disclosing the Amount of Guarantee Type of Fulfilled parties
Name of obligee guarantee amount guarantee Guarantee date provided guarantee Term or not or not
Chenming (HK) Limited 30 March 2019 200,000.00 2 April 2019 165,561.06 Guarantee provided 5 years No No
Chenming (HK) Limited 30 March 2019 100,000.00 30 July 2019 9,431.03 Guarantee provided 5 years No No
Zhanjiang Chenming Pulp & 7 August 2020 12,000.00 7 August 2020 12,000.00 Guarantee provided 1 year No No
Paper Co., Ltd.
Shouguang Meilun Paper 4 December 2020 20,000.00 4 December 2020 20,000.00 Pledge 2 years No No
Co., Ltd.
Shouguang Meilun Paper 4 December 2020 42,400.00 4 December 2020 42,400.00 Pledge 3 years No No
Co., Ltd.
Wuhan Chenming Hanyang 4 December 2020 3,000.00 4 December 2020 600.00 Pledge 3 years No No
Paper Holdings Co., Ltd.
Huanggang Chenming Pulp 4 December 2020 20,000.00 4 December 2020 20,000.00 Pledge 3 years No No
& Paper Co., Ltd.
Total amount of guarantee provided for subsidiaries 97,400.00 Total amount of guarantee provided for subsidiaries during the reporting period (C2) 104,431.03
approved during the reporting period (C1)
Total amount of guarantee provided for subsidiaries 397,400.00 Total balance of guarantee provided for subsidiaries as at the end of the reporting period (C4) 269,992.09
approved as at the end of the reporting period (C3)
Total amount of guarantee provided (i.e. sum of the above three guarantee amount)
Total amount of guarantee approved during the 1,086,958.19 Total amount of guarantee during the reporting period (A2+B2+C2) 885,712.41
reporting period (A1+B1+C1)
Total amount of guarantee approved as at the end of 7,755,458.19 Total balance of guarantee as at the end of the reporting period (A4+B4+C4) 903,754.22
the reporting period (A3+B3+C3)
The percentage of total amount of guarantee provided 1,310,707.98
(i.e. A4+B4+C4) to the net assets of the Company
Of which:
Balance of guarantee provided for shareholders, beneficial controllers and its related parties (D) 0
Balance of guarantee directly or indirectly provided for obligors with gearing ratio over 70% (E) 159,872.86
Total amount of guarantee provided in excess of 50% of net assets (F) 96,859.54
Sum of the above three amount of guarantee (D+E+F) 256,732.40
74 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
XVII. Material contracts and implementation (Cont’d)
2. Significant guarantees (Cont’d)
(2) External guarantees against the rules and regulations
Applicable √ Not applicable
There was no external guarantee provided by the Company which was against the rules and regulations during
the reporting period.
3. Entrusted cash and asset management
(1) Entrusted wealth management
Applicable √ Not applicable
The Company did not have any entrusted wealth management during the reporting period.
(2) Entrusted loans
Applicable √ Not applicable
The Company did not have any entrusted loans during the reporting period.
4. Material contracts in day-to-day operation
Applicable √ Not applicable
5. Other material contracts
Applicable √ Not applicable
The Company did not have any other material contracts during the reporting period.
2020 ANNUAL REPORT 75
VII Material Matters
XVIII. Fulfilment of Social Responsibility
1. Fulfilment of social responsibility
We have always been grateful for all our blessings, without forgetting our aspiration. For a long time, the Company
has constantly adhered to the development goal of “the industry serving the country and giving back to society”.
Guided by “creating high-quality paper products and sincerely returning to society”, while pursuing the maximisation
of value, we insist on green development, participate in public welfare activities, deeply integrate social responsibility
and corporate vision as well as mission and values, create greater value for stakeholders, thus becoming a world-
class papermaking enterprise group that shoulders greater responsibility.
Standardising the Company’s operation and protecting the rights and interests of shareholders. The Company
strictly abides by the requirements of the “Company Law”, “Securities Law”, “Articles of Association” and other
relevant laws and regulations, improves the corporate governance structure, and establishes an organisation with
shareholders’ general meeting, the Board and the Supervisory Committee as power, decision-making and supervision
in combination with the actual situation of the Company. The organisation and the management have clearly defined
powers and responsibilities, with each performing their own duties, effective checks and balances, scientific decision-
making, coordinated operation, continuously enhance the Company’s operation management and standard operation
level, and protect the legitimate rights and interests of all shareholders in a practical manner. During the reporting
period, the Company adopted a combination of on-site and online voting to convene a shareholders’ general meeting
in order to ensure that all shareholders, especially small and medium shareholders, enjoy equal status, enabling
them to effectively participate in and fully exercise their voting rights. At the same time, while achieving growth and
development, the Company attaches great importance to returns to investors, and insists on sharing the Company’s
business development results with investors. The Company has distributed cash dividends to shareholders for
eighteen consecutive years since 2003. During the reporting period, the Company implemented the 2019 profit
distribution plan, and distributed cash dividends of RMB437,433,593.74 to ordinary shareholders and cash dividends
of RMB172,676,073.42 to preferred shareholders, effectively safeguarding the legitimate rights and interests of all
shareholders of the Company and providing all shareholders with stable return on investments.
Practicing green development and adhering to environmental protection first. The Company has been actively
practicing the concept of “turquoise waters and verdant mountains are invaluable assets”. Relying on advanced
production technology and manufacturing equipment, extensive experience in waste management and a variety
of complete treatment systems, the Company unswervingly embarks on a novel industrialisation path with high
technology content, low resource consumption and less environmental pollution, and vigorously implements a green
and low-carbon strategy to achieve a “win-win” situation between economic, social and ecological benefits. The
Company took the lead in exploring black liquor resource recovery technology, launched the largest alkali recycling
project in the domestic paper industry, and built the first domestic medium-pressure steam generator with the
utilisation of alkali furnaces which could save 750,000 tons of standard coal per annum, with the alkali recovery rate
reaching 99.8%; adopted the world’s most advanced osmosis and filtration technology to recycle greywater, with a
conversion rate of up to 75% or above, and the standard of treated greywater is up to drinking water standard, which
could save 170,000 cubic meters of clean water on a daily basis. The Company insists on reduction from the source
of production and implements the “horizontally and vertically accessible” full-process control, thereby achieving low
consumption with low emissions, as well as recirculation with reduction. It vigorously develops circular economy,
comprehensively implements clean production, implements on-site 6S management, and achieves the Company’s
goal of “energy saving, consumption reduction, pollution reduction and efficiency enhancement”, becoming a
benchmark for environmentally-friendly and resource-saving enterprise. During the reporting period, the Company
was awarded the honorary title of “2020 Environmental and Socially Responsible Enterprise”.
76 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
XVIII. Fulfilment of Social Responsibility (Cont’d)
1. Fulfilment of social responsibility (Cont’d)
Adhering to the principle of people-orientation and promoting employee development. The Company always upholds
the “people-oriented” concept, and regards the benefit of employees as the driving force and foothold of the
Company’s development. It fully implements safety production management, intensifies safety production inspections
through continuous refinement of safety production standards, and carries out production safety education, training
and other campaigns for employees on an irregular basis in order to ensure the health and safety of employees. In
addition, it builds an equal development platform for employees by establishing and improving internal regulations and
systems as well as optimising performance reward rules, and implements diversified training to improve employees’
vocational skills, forming a strong atmosphere of “mass entrepreneurship and innovation”. Meanwhile, the Company
focuses on enriching the spare-time life of employees, promotes work-life balance, provides employees with living
place, establishes an employee mutual aid foundation to help employees in need, and enhances the sense of
happiness among staff. During the reporting period, the Company organised basketball games, speech contests, Mid-
Autumn Festival Gala, New Year’s Day Gala and other labour union activities to enrich employees’ spare time life and
enhance their sense of belonging. At the same time, the Company implemented an A-share restricted stock incentive
plan to grant A shares to 111 incentive targets based on the principle of “equivalent benefits and contributions”, and
realised the combination of medium to long-term incentive mechanism and talent development strategy, promoting
the high-quality development of the Company.
Enthusiastic support for charity and bravely shouldering social responsibilities. While adhering to meeting social
needs with high-quality products, the Company focuses on building harmonious and friendly public relations, actively
engages in charity activities, fulfils social responsibilities and creates social value. In recent years, the Company has
actively participated in charitable projects such as “Sunrise Aid for Education”, “Sunset Assistance to Elderly “, “Aid
for the Disabled”, “Rehabilitation and Medical Assistance”, and “Daily Donation with Compassion”, as well as disaster
relief including rescue activities in the Wenchuan Earthquake, Yushu Earthquake and Shouguang Flood. The Municipal
Party Committee and the municipal government of Weifang and Shouguang have successively awarded the Company
the “Most Caring Charity Enterprise”, and Mr. Chen Hongguo, the chairman of the Group, the honorary title of the “Most
Caring Charity Person”. During the reporting period, in the nationwide battle against the novel coronavirus pneumonia,
Chenming Group has made contributions and donations of more than RMB13 million in total, demonstrating the
great love of “heart-to-hands and mutual assistance”. And it joins hands with the People’s Education Agency and the
Chinese media to organise the charity donation activity of “sharing the fragrance of books in supporting the charity”
for the Jiangxi Sanqingshan School, and fully advances the “soul casting project”.
Society is the soil for cultivating the development of enterprises, and enterprises cannot attain sustainable
development without the care and support of all sectors of society. The Company will always keep its mission in
mind and shoulder the responsibilities. While focusing on the main business and strengthening the industry, the
Company insists on putting the protection of the rights and interests of shareholders, customers and employees,
and the promotion of social welfare development as the corporate value that it pursues. It continuously increases
investment in charity and public welfare, and injects positive energy into economic and social development as well as
the revitalisation of the national paper industry with a strong sense of responsibility and mission.
2. Fulfilment of social responsibility regarding targeted poverty relief
The Company did not commence any work regarding targeted poverty relief.
2020 ANNUAL REPORT 77
VII Material Matters
XVIII. Fulfilment of Social Responsibility (Cont’d)
3. Environmental protection matters
Are the Company and its subsidiaries classified as key pollutant discharging unit as specified by environmental
protection authority?
Yes
Number of
Name of major pol utants emission Distribution of Emission Pol utant emission Excessive
Name of company or subsid ary and specif c pol utants Way of emission outlets emission outlets concentration standards i plemented Total emissions Approved total emissions emissions
Huanggang Chenming Pulp & Smoke Organised emission 2 Within factory area Alkal furnace: 7.13 mg/m Alkal furnace: 30 mg/m Alkal furnace: 20.21t Alkal furnace: 124.357 t No
Paper Co., Ltd. Lime ki n: 5.54mg/m Lime ki n: 200mg/m Lime ki n: 3.77t Lime ki n: 26.44 t
Sulphur dioxide Organised emission 2 Within factory area Alkal furnace: 7.03 mg/m Alkal furnace: 200 mg/m Alkal furnace: 19.03t Alkal furnace: 321.193 t No
Lime ki n: 54.59mg/m Lime ki n: 850mg/m Lime ki n: 36.34t Lime ki n: 158.304 t
Nitrogen oxide Organised emission 1 Within factory area 152.14 mg/m 200 mg/m 463.17t 950.882 t No
COD Organised emission 1 Within factory area 53.22 mg/L 150 mg/L 369.93t 563.72t No
Ammonia nitrogen Organised emission 1 Within factory area 0.99 mg/L 14 mg/L 6.41t 40.12t No
Shandong Chenming Paper COD Organised emission 2 Chenming Industria Park 180mg/L 300mg/L 3279.9t 6510.74t No
Hold ngs Lim ted Ammonia nitrogen Organised emission 2 Chenming Industria Park 4.05mg/L 30 mg/L 78.69t 650.7t No
Sulphur dioxide Organised emission 2 Chenming Industria Park 5.27mg/m3 35mg/m3 20.51t 163.74t No
Nitrogen oxide Organised emission 2 Chenming Industria Park 32.65mg/m3 50mg/m3 119.07t 233.91t No
Smoke Organised emission 2 Chenming Industria Park 0.87mg/m3 5mg/m3 3.11t 23.39t No
Shouguang Mei un Paper Co., Sulphur dioxide Organised emission 4 Chenming Industria Park Power plant: 8.39mg/m3 Power plant: 35mg/m3 85.23t 423.11t No
Ltd. Alkal furnace: 2.19 mg/m3 Alkal furnace: 50 mg/m3
Lime ki n: 5.81mg/m3 Lime ki n: 50 mg/m3
Nitrogen oxide Organised emission 4 Chenming Industria Park Power plant: 32.7mg/m3 Power plant: 50mg/m3 1059.54t 1363.59t No
Alkal furnace: 77.1 mg/m3 Alkal furnace: 100 mg/m3
Lime ki n: 9.68 mg/m3 Lime ki n: 100 mg/m3
Smoke Organised emission 4 Chenming Industria Park Power plant: 0.9mg/m3 Power plant: 5mg/m3 23.74t 138.06t No
Alkal furnace: 1.55 mg/m3 Alkal furnace: 10 mg/m3
Lime ki n: 1.57 mg/m3 Lime ki n: 10 mg/m3
Wuhan Chenming Hanyang Paper COD Organised emission 1 East of the factory area 23mg/L 80mg/L 57.9149t 184.3t No
Hold ngs Co., Ltd. Ammonia nitrogen Organised emission 1 East of the factory area 1 mg/L 8 mg/L 1.8738t 17.3t No
Sulphur dioxide Organised emission 2 Within Qianneng Electric Power 130t/h furnace: 7.97 mg/m 75t/h 50mg/m 7.5779t 102.58t No
factory area furnace: 3.27mg/m
Nitrogen oxide Organised emission 2 Within Qianneng Electric Power 130t/h furnace: 74.99mg/m 75t/h 100 mg/m 73.938t 205.16t No
factory area furnace: 61.99mg/m
Smoke Organised emission 2 Within Qianneng Electric Power 130t/h furnace: 3.15mg/m 75t/h 20mg/m 3.0288t 41.032t No
factory area furnace: 2.49mg/m
Jiangxi Chenming Paper Co., Ltd. COD Organised emission 1 At the boundary of factory area 25.75mg/L 90mg/L 230.696t 1260t No
Ammonia nitrogen Organised emission 1 At the boundary of factory area 1.19mg/L 8mg/L 10.844t 112t No
Sulphur dioxide Organised emission 2 At the boundary of factory area 72.34mg/m3 200mg/m3 328.325t 806t No
Nitrogen oxide Organised emission 2 At the boundary of factory area 83.56mg/m3 200mg/m3 383.415t 806t No
Smoke Organised emission 2 At the boundary of factory area 5.94mg/m3 30mg/m3 27.311t 135t No
Ji i Chenming Paper Co., Ltd. COD Organised emission 1 At the boundary of factory area 48.02mg/l 90mg/l 200.19t 357t No
Ammonia nitrogen Organised emission 1 At the boundary of factory area 1.37mg/l 8mg/l 4.49t 34t No
Sulphur dioxide Organised emission 1 Within factory area 6.98mg/m3 100mg/m3 4.638t 97t No
Nitrogen oxide Organised emission 1 Within factory area 32.60mg/m3 100mg/m3 21.673t 213t No
Smoke Organised emission 1 Within factory area 11.76mg/m3 30mg/m3 7.82t 51.66t No
78 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
XVIII. Fulfilment of Social Responsibility (Cont’d)
3. Environmental protection matters (Cont’d)
Number of
Name of major pol utants emission Distribution of Emission Pol utant emission Excessive
Name of company or subsid ary and specif c pol utants Way of emission outlets emission outlets concentration standards i plemented Total emissions Approved total emissions emissions
Zhanj ang Chenming Pulp & COD Organised emission 1 Within factory area 44.151mg/L 90mg/L 750.573t 1943t No
Paper Co., Ltd.
Ammonia nitrogen Organised emission 1 Within factory area 1.138mg/L 8mg/L 19.408t 43.9t No
Total phosphorus Organised emission 1 Within factory area 0.246mg/L 0.8mg/L 4.160t 21.36t No
Total nitrogen Organised emission 1 Within factory area 5.587mg/L 12mg/L 94.040t 320.4t No
Smoke Organised emission 5 Within factory area Alkal recovery: 15.786mg/m3 Power Alkal recovery: 30mg/m3 183.592t 196t No
plant 1#: 6.043mg/m3 1#2#3# circulating flu d sed bed
Power plant 2#: 5.428mg/m3 boi ers: 30mg/m3
Power plant 3#: 5.006mg/m3 4# circulating flu d sed bed boi ers:
Power plant 4#: 3.387mg/m3 10mg/m3
Sulphur dioxide Organised emission 5 Within factory area Alkal recovery: 11.818mg/m3 Power Alkal recovery: 200mg/m3 190.464t 620t No
plant 1#: 7.507mg/m3 1#2#3# circulating flu d sed bed
Power plant 2#: 6.872mg/m3 boi ers: 100mg/m3
Power plant 3#: 9.564mg/m3 4# circulating flu d sed bed boi ers:
Power plant 4#: 3.775mg/m3 35mg/m3
Nitrogen oxide Organised emission 5 Within factory area Alkal recovery: 153.633mg/m3 Alkal recovery: 200mg/m3 1,326.078t 2,169.70t No
Power plant 1#: 13.608mg/m3 1#2#3# circulating flu d sed bed
Power plant 2#: 18.036mg/m3 boi ers: 100mg/m3
Power plant 3#: 20.734mg/m3 4# circulating flu d sed bed boi ers:
Power plant 4#: 18.710mg/m3 50mg/m3
Construction and operation of facilities for pollution prevention and control
(1) The Company and its subsidiaries strictly comply with laws, regulations and relevant rules regarding
environmental protection of the central and local government. The construction of projects strictly adheres to
the “three simultaneities” on environmental protection. In order to ensure pollutants are discharged strictly in
accordance with the requirements under laws and regulations and disposed properly, production and operation
strictly comply with the national Law on the Prevention and Control of Environmental Pollution, Law on the
Prevention and Control of Water Pollution, Law on the Prevention and Control of Air Pollution, Action Plan for
Prevention and Control of Water Pollution and Law on the Prevention and Control of Environmental Pollution by
Solid Waste and other laws.
(2) Both the Company and its subsidiaries are equipped with comprehensive environmental protection treatment
facilities. The pre-treatment-aerobic-anaerobic-in-depth treatment technology is the major technology for water
treatment, which can achieve standardised discharge of wastewater. Moreover, subsidiaries are equipped with
recycling system for process effluent, and reuse treated wastewater to the greatest extent in order to minimise
pollution. The Company has constructed a total of 9 water treatment plants, with daily treatment capacity of
350,000 m3. In addition, governmental authority will regularly visit the Company to conduct comparison of
online monitoring data every quarter. All data meets the standards.
2020 ANNUAL REPORT 79
VII Material Matters
XVIII. Fulfilment of Social Responsibility (Cont’d)
3. Environmental protection matters (Cont’d)
Construction and operation of facilities for pollution prevention and control (Cont’d)
(3) Each subsidiary’s organised emission outlets are equipped with an online monitoring system for real-time
monitoring. All subsidiaries have their own power plants. Each self-owned plant has its own environmental
protection facilities for de-dusting, desulphurisation and denitrification. Denitrification is conducted through
SCR or SNCR, while desulphurisation is primarily conducted through gypsum desulphurisation (ammonia
desulphurisation is adopted in the self-owned plant of Jiangxi Chenming). Substantially all of the emissions
indicators are below the national and local execution standards. Other alkali recovery boilers and lime kilns are
also in compliance with the emission standards.
Environmental impact assessment of construction projects and other environmental protection administrative
licensing
The Company has strictly complied with the environmental laws and regulations all along to carry out environmental
impact assessment of construction projects. The construction projects are all subject to environmental impact
assessment. During the construction process, a reasonable environmental protection project construction plan is
formulated and strictly implemented. The environmental protection facilities and the main project are designed,
constructed and put into operation at the same time. At present, all construction projects put into production have
obtained environmental impact assessment approvals and acceptance approvals.
In June 2017, the Company and its subsidiaries completed the formalities for new discharge permits in accordance
with the Measures for the Administration of Pollutant Discharge Permits of the Ministry of Environmental Protection,
and the discharge permits of the new projects were renewed according to the environmental protection requirements
in a timely manner.
Emergency plan for emergency environmental incidents
The Company has strictly implemented emergency regulations for emergency environmental incidents, and formulated
various emergency plans for emergency environmental incidents according to the technical requirements in the
“Technical Guidelines for Emergency Environmental Pollution Accidents”. The plans are reviewed by and filed with the
Environmental Protection Bureau, and regular emergency training and emergency drills are conducted. Emergency
measures in relation to dangerous chemicals are formulated in accordance with the environmental protection
requirements. At the same time, necessary emergency supplies are provided with regular inspections and updates.
Environmental self-monitoring programme
The Company has strictly complied with self-monitoring laws and regulations, and conducted self-monitoring in
accordance with the environmental protection requirements to establish and perfect the corporate environmental
management ledgers and materials. At present, self-monitoring is a combination of manual monitoring and automatic
monitoring. At the same time, qualified units are engaged to conduct regular monitoring. Automatically monitored
items include: total wastewater discharge (COD, ammonia nitrogen, flow rate, total phosphorus, total nitrogen and
PH); power plant, alkali recovery boilers and lime kiln exhaust emissions (sulphur dioxide, nitrogen oxide and smoke).
Manually monitored items include: daily monitoring of COD, ammonia nitrogen, SS, chroma, PH, total phosphorus
and total nitrogen indicators. Sewage and other monitoring items, unorganised exhaust emission, solid waste, and
noise at the plant boundary, are monitored on a monthly or quarterly basis by qualified units engaged in accordance
with the local environmental protection requirements in relation to each subsidiary.
The self-monitoring data and environmental monitoring programmes for pollutants discharge of various subsidiaries
are published on the national key pollution source information disclosure website and the provincial key pollution
source information disclosure websites.
80 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
XVIII. Fulfilment of Social Responsibility (Cont’d)
3. Environmental protection matters (Cont’d)
Other environmental information to be disclosed
The relevant environmental protection information of the pollutant discharge permit information and the pollutant
discharge permit requirements is announced on the national sewage discharge permit management information
platform.
Other environmental protection related information
Other environmental protection related information is announced on the Company’s website.
XIX. Other matters of significance
√ Applicable Not applicable
1. Approval of registration of super & short-term commercial paper
On 16 February 2020, the super & short-term commercial paper issue of the Company was registered and approved
by the Notice of Acceptance of Registration (Zhong Shi Xie Zhu [2020] No. SCP27) of the National Association of
Financial Market Institutional Investors. The super & short-term commercial paper of the Company approved for
registration amounted to RMB7 billion, and the registered amount was valid for 2 years from the issue date of the
notice, and can be issued in tranches during the effective term of the registration.
For details, please refer to the relevant announcement (announcement no.: 2020-005) of the Company published on
CNINFO on 17 February 2020.
2. Implementation of the 2020 restricted A shares incentive scheme
For details, please refer to XV. Implementation of the equity incentive plan, employee shareholding plan or other
employee incentive measure of the Company in VII Material Matters of this report.
3. Completion of implementation of the plan for the increase in shareholding of the controlling
shareholder
Due to its confidence in the Company’s future business growth and development prospects, as at 9 September
2020, the implementation of the plan for the increase in shareholding of Chenming Holdings Company Limited, the
Company’s controlling shareholder, was completed. Chenming Holdings cumulatively increased its shareholding in
the Company by 17,817,434 A shares through centralised bidding on the Shenzhen Stock Exchange trading system,
representing 0.6% of the Company’s total share capital. In aggregate, the increase in shareholding amounted to
RMB100,118,100.
For details, please refer to the relevant announcement (announcement no.: 2020-087) of the Company published on
CNINFO on 10 September 2020.
2020 ANNUAL REPORT 81
VII Material Matters
XIX. Other matters of significance (Cont’d)
4. Information disclosure index for 2020
Announcement No. Subject matter Date of publication Publication website and index
2020-001 Announcement on Resolutions of the Seventh 8 January 2020 http://www.cninfo.com.cn
Extraordinary Meeting of the Ninth Session of the
Board
2020-002 Announcement on the Establishment of Overseas 8 January 2020 http://www.cninfo.com.cn
Subsidiaries by Foreign Investment
2020-003 Announcement on Pledge of Shareholders’ Shares 22 January 2020 http://www.cninfo.com.cn
2020-004 Announcement on External Donations to 8 February 2020 http://www.cninfo.com.cn
Support the Fight Against the Novel Coronavirus
Pneumonia
2020-005 Announcement on Approval of Registration of 18 February 2020 http://www.cninfo.com.cn
Super & Short-term Commercial Paper
2020-006 The First Indicative Announcement on the 19 February 2020 http://www.cninfo.com.cn
Adjustment of the Coupon Rate of “18 Chenming
Bond 01” and Repurchase Measure for
Bondholders
2020-007 Announcement on Resolutions of the Eighth 22 February 2020 http://www.cninfo.com.cn
Extraordinary Meeting of the Ninth Session of the
Board
2020-008 Announcement on Resolutions of the Third 22 February 2020 http://www.cninfo.com.cn
Extraordinary Meeting of the Ninth Session of the
Supervisory Committee
2020-009 Announcement on Delay in Increase of Shares of 22 February 2020 http://www.cninfo.com.cn
the Company by the Controlling Shareholder
2020-010 Notice of 2020 First Extraordinary General Meeting 22 February 2020 http://www.cninfo.com.cn
2020-011 The Second Indicative Announcement on 21 February 2020 http://www.cninfo.com.cn
the Adjustment of the Coupon Rate of “18
Chenming Bond 01” and Repurchase Measure for
Bondholders
2020-012 The Third Indicative Announcement on the 25 February 2020 http://www.cninfo.com.cn
Adjustment of the Coupon Rate of “18 Chenming
Bond 01” and Repurchase Measure for
Bondholders
2020-013 Announcement on Repurchase Report of Investor 28 February 2020 http://www.cninfo.com.cn
of “18 Chenming Bond 01”
2020-014 Announcement on the Continued Pledge of Shares 7 March 2020 http://www.cninfo.com.cn
held by Shareholders
2020-015 Announcement on the Distribution of Dividend of 10 March 2020 http://www.cninfo.com.cn
Preference Share
2020-016 Announcement on Resolution of the 2020 First 10 March 2020 http://www.cninfo.com.cn
Extraordinary General Meeting
2020-017 Announcement on Resolutions of the Fourth 28 March 2020 http://www.cninfo.com.cn
Extraordinary Meeting of the Ninth Session of the
Board
2020-018 Announcement on Resolutions of the Fourth 28 March 2020 http://www.cninfo.com.cn
Extraordinary Meeting of the Ninth Session of the
Supervisory Committee
82 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
XIX. Other matters of significance (Cont’d)
4. Information disclosure index for 2020 (Cont’d)
Announcement No. Subject matter Date of publication Publication website and index
2020-019 2019 Annual Report Summary 28 March 2020 http://www.cninfo.com.cn
2020-020 Notice of 2019 Annual General Meeting 28 March 2020 http://www.cninfo.com.cn
2020-021 Announcement on Appointment of Auditor for 28 March 2020 http://www.cninfo.com.cn
2020
2020-022 Announcement on the Cancellation of Guarantee 28 March 2020 http://www.cninfo.com.cn
Amount for Some Subsidiaries and the Expected
Increase in New Guarantee Amount
2020-023 Announcement on the Estimated Day-to-day 28 March 2020 http://www.cninfo.com.cn
Related Party Transactions for 2020
2020-024 Announcement on Financial Assistance from a 28 March 2020 http://www.cninfo.com.cn
Subsidiary to Its Investee
2020-025 Supplemental Announcement on Estimated Day- 30 March 2020 http://www.cninfo.com.cn
to-day Related Party Transactions for 2020
2020-026 Announcement of Resolutions of the Ninth 31 March 2020 http://www.cninfo.com.cn
Extraordinary Meeting of the Ninth Session of the
Board
2020-027 Announcement of Resolutions of the Fourth 31 March 2020 http://www.cninfo.com.cn
Extraordinary Meeting of the Ninth Session of the
Supervisory Committee
2020-028 Notice of 2020 Second Extraordinary General 31 March 2020 http://www.cninfo.com.cn
Meeting
2020-029 Notice of 2020 First Class Meeting for Holders 31 March 2020 http://www.cninfo.com.cn
of Domestic-listed Shares and 2020 First Class
Meeting for Holders of Overseas Listed Shares
2020-030 Announcement on Public Solicitation of Voting 31 March 2020 http://www.cninfo.com.cn
Rights by Independent Directors
2020-031 Announcement on Receipt of Government 31 March 2020 http://www.cninfo.com.cn
Subsidies by Subsidiaries
2020-032 Announcement on Repurchase Report on 31 March 2020 http://www.cninfo.com.cn
Bondholders of “18 Chenming Bond 01”
2020-033 Announcement on payment of 2020 interest with 31 March 2020 http://www.cninfo.com.cn
respect to the first tranche of Corporate Bonds
publicly issued to qualified investors in 2018
2020-034 Announcement on Pledge of Shares held by 7 April 2020 http://www.cninfo.com.cn
Shareholders
2020-035 Announcement on Estimated Results for First 14 April 2020 http://www.cninfo.com.cn
Quarter of 2020
2020-036 Announcement on the Release of Pledge of 15 April 2020 http://www.cninfo.com.cn
Shares held by Shareholders
2020-037 Reply to the inquiry letter of Shenzhen Stock 17 April 2020 http://www.cninfo.com.cn
Exchange Regarding Annual Report
2020-038 2020 First Quarterly Report 21 April 2020 http://www.cninfo.com.cn
2020-039 Announcement on Result of the Issue of 2020 First 24 April 2020 http://www.cninfo.com.cn
Tranche of Super & Short-term Commercial Paper
2020-040 Announcement on Postponement of Resale of “18 30 April 2020 http://www.cninfo.com.cn
Chenming Bond 01” Corporate Bonds
2020 ANNUAL REPORT 83
VII Material Matters
XIX. Other matters of significance (Cont’d)
4. Information disclosure index for 2020 (Cont’d)
Announcement No. Subject matter Date of publication Publication website and index
2020-041 Announcement on Approval of 2020 Restricted 6 May 2020 http://www.cninfo.com.cn
A Share Incentive Scheme by the State-owned
Assets Supervision and Administration Bureau of
Shouguang City
2020-042 The Explanation on the Status of Announcement 8 May 2020 http://www.cninfo.com.cn
and Review Opinions of the Supervisory
Committee Regarding the List of Participants
under 2020 Restricted A Share Incentive Scheme
2020-043 Self-Examination Report for the Trading of Shares 16 May 2020 http://www.cninfo.com.cn
of the Company by Insiders and Participants of
the 2020 Restricted A Share Incentive Scheme
2020-044 Announcement on Resolutions of 2020 Second 16 May 2020 http://www.cninfo.com.cn
Extraordinary General Meeting, 2020 First Class
Meeting for Holders of Domestic-listed Shares,
and 2020 First Class Meeting for Holders of
Overseas Listed Shares
2020-045 Announcement on Receipt of Government 28 May 2020 http://www.cninfo.com.cn
Subsidies by Subsidiaries
2020-046 Announcement on Resolutions of the Tenth 30 May 2020 http://www.cninfo.com.cn
Extraordinary Meeting of the Ninth Session of the
Board
2020-047 Announcement on Resolutions of the Fifth 30 May 2020 http://www.cninfo.com.cn
Extraordinary Meeting of the Ninth session of the
Supervisory Committee
2020-048 Announcement on Matters Relating to Adjustments 30 May 2020 http://www.cninfo.com.cn
to the 2020 Restricted A Share Incentive Scheme
2020-049 Announcement on Grant of Restricted Shares to 30 May 2020 http://www.cninfo.com.cn
the Participants
2020-050 Announcement on the Results of Resale of “18 1 June 2020 http://www.cninfo.com.cn
Chenming Bond 01” Bonds
2020-051 Announcement on Pledge of Shares held by 6 June 2020 http://www.cninfo.com.cn
Shareholders
2020-052 Explanation on Media Coverage of a Subsidiary 19 June 2020 http://www.cninfo.com.cn
2020-053 Announcement on Resolutions of 2019 Annual 20 June 2020 http://www.cninfo.com.cn
General Meeting
2020-054 Announcement on Resolutions of the Eleventh 20 June 2020 http://www.cninfo.com.cn
Extraordinary Meeting of the Ninth Session of the
Board
2020-055 Announcement on Estimated Securities Investment 20 June 2020 http://www.cninfo.com.cn
Quota for 2020
2020-056 Supplemental Announcement on the Poll Results 20 June 2020 http://www.cninfo.com.cn
of 2020 Second Extraordinary Meeting, the 2020
First Class Meeting for Holders of Domestic-listed
Shares, and 2020 First Class Meeting for Holders
of Overseas-listed Shares
84 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
XIX. Other matters of significance (Cont’d)
4. Information disclosure index for 2020 (Cont’d)
Announcement No. Subject matter Date of publication Publication website and index
2020-057 Announcement on the Release of Pledge of 1 July 2020 http://www.cninfo.com.cn
Shares held by Shareholders
2020-058 Announcement on Receipt of Government 2 July 2020 http://www.cninfo.com.cn
Subsidies
2020-059 Announcement on the Progress of Receipt 3 July 2020 http://www.cninfo.com.cn
of Environmental Protection Relocation
Compensation by a Subsidiary
2020-060 Announcement on Receipt of Environmental 6 July 2020 http://www.cninfo.com.cn
Protection Incentives by Zhanjiang Chenming
2020-061 Announcement on Completion of Registration 9 July 2020 http://www.cninfo.com.cn
of the Grant under the 2020 Restricted A Shares
Incentive Scheme
2020-062 Announcement on the Inclusion of the Company 9 July 2020 http://www.cninfo.com.cn
on the Credit Rating Watch List by a Credit Rating
Agency
2020-063 Announcement of Resolutions of the Sixth 11 July 2020 http://www.cninfo.com.cn
Extraordinary Meeting of the Ninth Session of the
Supervisory Committee
2020-064 Announcement on Resignation of the Chairman of 11 July 2020 http://www.cninfo.com.cn
the Supervisory Committee and By-election of a
Supervisor
2020-065 Announcement on Resolutions of the Twelfth 11 July 2020 http://www.cninfo.com.cn
Extraordinary Meeting of the Ninth Session of the
Board
2020-066 Notice of 2020 Third Extraordinary General 11 July 2020 http://www.cninfo.com.cn
Meeting
2020-067 Announcement on Resolution of the Thirteenth 18 July 2020 http://www.cninfo.com.cn
Extraordinary Meeting of the Ninth Session of the
Board
2020-068 Announcement on Capital Increase and the 18 July 2020 http://www.cninfo.com.cn
Introduction of a
Strategic Investor by a Holding Subsidiary
2020-069 Announcement on the Continued Pledge of Shares 25 July 2020 http://www.cninfo.com.cn
held by Shareholders
2020-070 Announcement on Adjustment to Simulated 25 July 2020 http://www.cninfo.com.cn
Conversion Price of Preference Shares
2020-071 Announcement on Resolution of the 2020 Third 28 July 2020 http://www.cninfo.com.cn
Extraordinary General Meeting
2020-072 Announcement on the Provision of Guarantees for 8 August 2020 http://www.cninfo.com.cn
Bank Loans of a Subsidiary by a Wholly-owned
Subsidiary
2020-073 Announcement on the Distribution of Dividend for 10 August 2020 http://www.cninfo.com.cn
Second Tranche of Preference Share
2020 ANNUAL REPORT 85
VII Material Matters
XIX. Other matters of significance (Cont’d)
4. Information disclosure index for 2020 (Cont’d)
Announcement No. Subject matter Date of publication Publication website and index
2020-074 Announcement on the Implementation of the 11 August 2020 http://www.cninfo.com.cn
Distribution of Residual Profits of 2019 to
Preference Shareholders
2020-075 Announcement on the Implementation of Dividend 11 August 2020 http://www.cninfo.com.cn
Distribution to Holders of A Shares and B Shares
for 2019
2020-076 2020 Interim Report Summary 11 August 2020 http://www.cninfo.com.cn
2020-077 Announcement in Respect of Resolutions of the 11 August 2020 http://www.cninfo.com.cn
Sixth Meeting of the Ninth Session of the Board of
Directors
2020-078 Announcement on Huanggang Chenming Phase II 11 August 2020 http://www.cninfo.com.cn
Construction Project
2020-079 Notice of 2020 Fourth Extraordinary General 11 August 2020 http://www.cninfo.com.cn
Meeting
2020-080 Indicative Announcement 19 August 2020 http://www.cninfo.com.cn
2020-081 Supplemental Announcement on the 2020 Interim 19 August 2020 http://www.cninfo.com.cn
Report
2020-082 Announcement on the 2020 Interest Payment of 19 August 2020 http://www.cninfo.com.cn
Corporate Bonds (Phase I)
2020-083 Supplemental Announcement in Relation to the 22 August 2020 http://www.cninfo.com.cn
Progress of Litigation and Arbitration
2020-084 Announcement on the Establishment of Weifang 26 August 2020 http://www.cninfo.com.cn
Chenchuang Sub-Fund with Minmetals Trust and
the Investment in a Subsidiary
2020-085 Poll Results Announcement of the 2020 Fourth 28 August 2020 http://www.cninfo.com.cn
Extraordinary General Meeting
2020-086 Announcement on the Continued Pledge of Shares 5 September 2020 http://www.cninfo.com.cn
held by Shareholders
2020-087 Announcement on Completion of Implementation 10 September 2020 http://www.cninfo.com.cn
of the Plan for the Increase in Shareholding of the
Controlling Shareholder
2020-088 Announcement on the Receipt of Government 10 September 2020 http://www.cninfo.com.cn
Subsidy by a Subsidiary
2020-089 Announcement on the Distribution of Dividend for 15 September 2020 http://www.cninfo.com.cn
Third Tranche of Preference Share
2020-090 Announcement on the Participation in the Online 26 September 2020 http://www.cninfo.com.cn
Investors Collective Reception Day for Listed
Companies in Shandong
2020-091 Announcement on Resolutions of the Fourteenth 30 September 2020 http://www.cninfo.com.cn
Extraordinary Meeting of the Ninth Session of the
Board
2020-092 Announcement on Capital Increase and the 30 September 2020 http://www.cninfo.com.cn
Introduction of a Strategic Investor by a Holding
Subsidiary
2020-093 Announcement on External Investment 30 September 2020 http://www.cninfo.com.cn
86 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
XIX. Other matters of significance (Cont’d)
4. Information disclosure index for 2020 (Cont’d)
Announcement No. Subject matter Date of publication Publication website and index
2020-094 Announcement in respect of Provision of 13 October 2020 http://www.cninfo.com.cn
Guarantee in Favour of a Subsidiary for Financing
2020-095 2020 Third Quarterly Report 23 October 2020 http://www.cninfo.com.cn
2020-096 Announcement on Release of Pledge of Shares 6 November 2020 http://www.cninfo.com.cn
Held by Shareholders
2020-097 Announcement in respect of Provision of 6 November 2020 http://www.cninfo.com.cn
Guarantee in Favour of a Subsidiary for Financing
2020-098 Announcement in respect of Provision of 14 November 2020 http://www.cninfo.com.cn
Guarantee in Favour of Subsidiaries by a Wholly-
owned Subsidiary
2020-099 Announcement in respect of Provision of 5 December 2020 http://www.cninfo.com.cn
Guarantee in Favour of a Subsidiary
2020-100 Announcement on Resolutions of the Fifteenth 5 December 2020 http://www.cninfo.com.cn
Extraordinary Meeting of the Ninth Session of the
Board
2020-101 Announcement on the Acquisition of Non- 5 December 2020 http://www.cninfo.com.cn
controlling Interest in a Subsidiary and External
Guarantee
2020-102 Announcement on the Transfer of Equity to Repay 5 December 2020 http://www.cninfo.com.cn
Debt
2020-103 Announcement on External Guarantees 5 December 2020 http://www.cninfo.com.cn
2020-104 Announcement on the Issue of USD Bonds by a 5 December 2020 http://www.cninfo.com.cn
Subsidiary and the Provision of Guarantee
2020-105 Notice of 2020 Fifth Extraordinary General Meeting 5 December 2020 http://www.cninfo.com.cn
2020-106 Poll Results Announcement of the 2020 Fifth 22 December 2020 http://www.cninfo.com.cn
Extraordinary General Meeting
2020-107 Announcement on Resolutions of the Sixteenth 24 December 2020 http://www.cninfo.com.cn
Extraordinary Meeting of the Ninth Session of the
Board
2020-108 Announcement on the Cooperation to Establish 24 December 2020 http://www.cninfo.com.cn
Changjiang Chenming Equity Investment Fund
and Capital Increase of a Subsidiary
2020-109 Announcement on Investment in the Establishment 24 December 2020 http://www.cninfo.com.cn
of a Limited Partnership
2020 ANNUAL REPORT 87
VII Material Matters
Announcement No. Subject matter Date of publication Publication website and index
2020-110 Announcement in respect of Provision of 24 December 2020 http://www.cninfo.com.cn
Guarantee in Favour of a Subsidiary by a
Subsidiary
2020-111 Announcement on Receipt of Government 31 December 2020 http://www.cninfo.com.cn
Subsidies by the Subsidiary Zhanjiang Chenming
2020-112 Announcement on the Removal of the Company 31 December 2020 http://www.cninfo.com.cn
from the Credit Rating Watch List by a Credit
Rating Agency
XX. Matters of significant of subsidiaries of the Company
√ Applicable Not applicable
1. Outbound investment and establishment of overseas subsidiaries
The Resolution in relation to the Establishment of Overseas Subsidiaries through Outbound Investment was
considered and approved at the seventh extraordinary meeting of the ninth session of the Board of the Company on 7
January 2020 to propose to establish Chenming (Overseas) Co., Ltd. and Chenming (Singapore) Co., Ltd..
For details, please refer to the relevant announcement (announcement no.: 2020-002) of the Company published on
CNINFO on 8 January 2020.
2. Huanggang Chenming phase II construction project with a focus on the principal activities of pulp
production and paper making
The Resolution in relation to the Huanggang Chenming Phase II Construction Project was considered and approved at
the fourth extraordinary general meeting of the Company held on 27 August 2020. The planned total investment of the
Huanggang Chenming phase II project amounts to RMB12,800 million. 4 paper production lines of annual production
capacity of 1.50 million tonnes (including, among other things, cultural paper and white paper board and the paper
production of the project will only use self-produced pulp) are proposed to be constructed. The ancillary facilities to
be constructed include, among other things, a machine-made pulp production line of annual production capacity of
520,000 tonnes, sewage treatment system, combined heat and power generation project and piers.
In order to support the construction of Huanggang Chenming phase II project and facilitate the development of the
principal activities of pulp production and paper making, the Company initiated the establishment of Changjiang
Chenming Equity Investment Fund in cooperation with Hubei Changjiang (Huanggang) Industrial Investment Fund
Partnership (Limited Partnership) through the Company’s subsidiaries Zhanjiang Chenming and Hubei Huanggang
Chenming Equity Investment Fund Management Co., Ltd. to increase the capital of Huanggang Chenming by up
to RMB2,000.00 million. In addition, upon receipt of the above funds, Huanggang Chenming shall proceed with the
capital increase of Huanggang Chenming Paper Technology Co., Ltd., its wholly-owned subsidiary, for the phase II
project construction of Huanggang Chenming.
For details, please refer to the relevant announcements (announcement nos.: 2020-077, 2020-078, 2020-085 and
2020-108) of the Company published on CNINFO on 11 August 2020, 28 August 2020 and 24 December 2020.
88 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
3. Introduction of a strategic investor by Shouguang Meilun
In order to actively and prudently reduce the gearing ratio of the Company, optimise the capital structure, and
enhance the overall capital strength and competitiveness of the Company, Shouguang Meilun, a holding subsidiary of
the Company, introduced Dongxing Securities Investment Co., Ltd. to achieve capital increase of RMB300 million.
Chenming GDR Fund initiated the establishment of Chenchuang Fund in cooperation with Minmetals Investment
Management Co., Ltd., Chenming (Qingdao) Asset Management Co., Ltd. and Minmetals International Trust Co., Ltd..
Chenchuang Fund intended to increase the capital of Shouguang Meilun by instalments with the entire paid-in capital
contributions, and the amount of capital increase shall not exceed RMB900 million.
For details, please refer to the relevant announcements (announcement nos.: 2020-068 and 2020-092) of the
Company published on CNINFO on 18 July 2020 and 30 September 2020.
2020 ANNUAL REPORT 89
VIIIChanges in Share Capital and Shareholders
I. Changes in shares
1. Changes in shares
Unit: share
Opening balance Change during the reporting period (+/-) Closing balance
Converted
Amount Percentage New issue Bonus issue from reserves Others Subtotal Amount Percentage
I. Restricted shares 10,580,524 0.36% 79,600,000 0 0 95,800 79,695,800 90,276,324 3.03%
1. Shares held by other domestic
investors 10,580,524 0.36% 79,600,000 0 0 95,800 79,695,800 90,276,324 3.03%
Of which: Shares held by domestic
natural persons 10,580,524 0.36% 79,600,000 0 0 95,800 79,695,800 90,276,324 3.03%
II. Non-restricted shares 2,894,027,676 99.64% 0 0 0 – 95,800 – 95,800 2,893,931,876 96.97%
1. RMB ordinary shares 1,659,337,160 57.13% 0 0 0 – 95,800 – 95,800 1,659,241,360 55.60%
2. Domestic listed foreign shares 706,385,266 24.32% 0 0 0 0 0 706,385,266 23.67%
3. Overseas listed foreign shares 528,305,250 18.19% 0 0 0 0 0 528,305,250 17.70%
III. Total number of shares 2,904,608,200 100.00% 79,600,000 0 0 0 79,600,000 2,984,208,200 100.00%
The reasons for such changes
√ Applicable Not applicable
According to the Practice Guidance for the Company’s Shares Held by the Directors, Supervisors and Senior
Management of the Listed Companies of Shenzhen Stock Exchange, during the reporting period, 34,925
restricted RMB ordinary shares (A shares) held by Directors and senior management who resigned became
non-restricted shares; and 130,725 unrestricted RMB ordinary shares (A shares) additionally acquired by the
Company’s Directors, Supervisors and senior management became restricted shares.
On 15 July 2020, 79,600,000 A Shares under the 2020 Restricted Share Incentive Scheme granted to the
motivated personnel were issued and listed, and the company’s restricted sale of shares increased by
79,600,000 shares.
Approval of changes in shareholding
√ Applicable Not applicable
For details, please refer to XV. Implementation of the equity incentive plan, employee shareholding plan or other
employee incentive measure of the Company in V Material Matters.
Transfer of shares arising from changes in shareholding
Applicable √ Not applicable
Progress of share repurchase
Applicable √ Not applicable
90 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIIIChanges in Share Capital and Shareholders
I. Changes in shares (Cont’d)
1. Changes in shares (Cont’d)
Progress of decrease in the holding of repurchased shares by way of bidding
Applicable √ Not applicable
The effects of changes in shareholding on financial indicators such as basic earnings per share, diluted earnings
per share and net assets per share attributable to ordinary shareholders of the Company for the latest year and
the latest period
Applicable √ Not applicable
Other information considered necessary by the Company or required by the securities regulatory authorities to be
disclosed
Applicable √ Not applicable
2. Changes in restricted shares
√ Applicable Not applicable
Unit: share
Restricted shares Restricted shares Restricted shares Restricted shares
at the beginning increased during released during at the end
Name of shareholders of period the period the period of period Reason for restriction Date of release from restriction
Chen Gang 139,700 34,925 104,775 Locked-up shares of Directors, Under relevant requirements
Supervisors and Senior for shares held by Directors,
Management Supervisors and Senior
Management
Li Dong 56,250 18,750 0 75,000 Locked-up shares of Directors, Under relevant requirements
Supervisors and Senior for shares held by Directors,
Management Supervisors and Senior
Management
Li Kang 0 111,975 0 111,975 Locked-up shares of Directors, Under relevant requirements
Supervisors and Senior for shares held by Directors,
Management Supervisors and Senior
Management
The participants of the 2020 0 79,600,000 0 79,600,000 Restricted share of the Restricted shares released in
Restricted A Share Incentive participants of the Share accordance with the equity
Scheme Incentive Scheme incentive plan (draft)
Total 195,950 79,730,725 34,925 79,891,750
2020 ANNUAL REPORT 91
VIIIChanges in Share Capital and Shareholders
II. Issuance and listing of securities
1. Issuance of securities (excluding Preference Shares) during the reporting period
√ Applicable Not applicable
Amount Last
Issue price approved for transaction
Name of share and (or interest listing and date for Date of
its derivative Issue date rate) Amount issued Listing date trading transaction Disclosure index disclosure
Type of shares
Restricted Share under 15 July 2020 RMB2.85 79,600,000 15 July 2020 79,600,000 N/A http://www.cninfo.com.cn/ 9 July 2020
Incentive Scheme per share
2. Changes in the total number of shares and structure of shareholders and the structure of the assets
and liabilities of the Company
√ Applicable Not applicable
Resolutions including the Resolution in Relation to the 2020 Restricted Share Incentive Scheme of Shandong
Chenming Paper Holdings Limited (Draft) and Its Summary were considered and approved at the 2020 second
extraordinary general meeting, the 2020 first class meeting for holders of domestic-listed shares and the 2020 first
class meeting for holders of overseas-listed shares of the Company. On 29 May 2020, resolutions including the
Resolution in Relation to the Grant of Restricted Shares to the Participants were considered and approved at the
tenth extraordinary meeting of ninth session of the Board and the fifth extraordinary meeting of the ninth session
of the Board of Director of the Company to grant 79,600,000 restricted A Shares to 111 participants. The shares
were issued and listed on 15 July 2020. The total number of shares of the Company increased from 2,904,608,200
shares to 2,984,208,200 shares. For details, please refer to XV. Implementation of the equity incentive plan, employee
shareholding plan or other employee incentive measure of the Company in VII Material Matters.
3. Existing staff shares
Applicable √ Not applicable
92 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIIIChanges in Share Capital and Shareholders
III. Shareholders and beneficial controllers
1. Total number of shareholders and shareholdings
Unit: share
Total number of ordinary 119,948, of which Total number of ordinary 113,916, of which Total number of holders 0 Total number of holders 0
shareholders as at the end 98,300 were holders of shareholders as at the 94,363 were holders of of Preference Shares of Preference Shares
of the reporting period A shares, 21,290 were end of the month prior to A shares, 19,210 were with restored voting with restored voting
holders of B shares and the publication date of holders of B shares and right as at the end of the right as at the end of
358 were holders of H this annual report 343 were holders of H reporting period the month prior to the
shares shares disclosure date of the
annual report
Shareholdings of shareholders interested in more than 5% of the shares of the Company or Top 10 shareholders
Changes
(increase or
Number of decrease)
shares held at during the Number of Number of
Percentage of the end of the Reporting restricted non-restrict
Name of shareholders Nature of shareholders shareholding reporting period period shares held shares held Share pledged or locked-up
Status of shares Number
CHENMING HOLDINGS COMPANY LIMITED State-owned legal person 15.32% 457,322,919 11,926,791 0 457,322,919 Pledge 238,470,000
HKSCC NOMINEESLIMITED Overseas legal person 12.51% 373,359,125 195,250 0 373,359,125 – –
CHENMING HOLDINGS (HONG KONG) LIMITED Overseas legal person 12.20% 364,131,563 0 0 364,131,563 – –
CENTRAL HUIJIN ASSET MANAGEMENT LTD. State-owned legal person 2.02% 60,206,850 0 0 60,206,850 – –
HONG KONG SECURITIES CLEARING COMPANY LIMITED Overseas legal person 1.14% 34,168,330 20,929,867 0 34,168,330 – –
Chen Hongguo Domestic nature person 1.04% 31,080,044 20,000,000 28,310,033 2,770,011 – –
National Social Security Fund 418 Others 0.63% 18,840,000 15,633,749 0 18,840,000 – –
Ningbo Asia Paper Tube Carton Co., Ltd. Domestic non-state- 0.62% 18,400,000 12,419,854 0 18,400,000 – –
owned legal person
VANGUARD TOTAL INTERNATIONAL STOCK INDEX FUND Overseas legal person 0.50% 14,771,945 2,156,775 0 14,771,945 – –
VANGUARD EMERGING MARKETS STOCK INDEX FUND Overseas legal person 0.44% 13,121,946 209,589 0 13,121,946 – –
Strategic investors or general legal persons who become the Nil
top ten shareholders due to the placement of new shares
Related party relationship or acting in concert among the A shareholder, Chenming Holdings (Hong Kong) Limited, which is an overseas legal person, is a wholly-owned subsidiary of a shareholder, Shouguang Chenming Holdings
above shareholders Company Limited, which is a state-owned legal person. A shareholder, Chen Hongguo, is the legal representative, chairman and general manager of Chenming Holdings
Company Limited. Save for the above, it is not aware that any other shareholders of tradable shares are persons acting in concert. It is also not aware that any other
shareholders of tradable shares are related to each other.
Explanation of the aforementioned shareholders’ entrusted/ Nil
entrusted voting rights and waiver of voting rights
2020 ANNUAL REPORT 93
VIIIChanges in Share Capital and Shareholders
III. Shareholders and beneficial controllers (Cont’d)
1. Total number of shareholders and shareholdings (Cont’d)
Shareholdings of the top ten shareholders of non-restricted shares
Number of non-
restricted shares
held as at the end of
Name of shareholders the reporting period Class of shares
Class of shares Number
CHENMING HOLDINGS COMPANY LIMITED 457,322,919 RMB ordinary shares 457,322,919
HKSCC NOMINEESLIMITED 373,359,125 Overseas listed 373,359,125
foreign shares
CHENMING HOLDINGS (HONG KONG) LIMITED 364,131,563 Domestic listed 210,717,563
foreign shares
Overseas listed 153,414,000
foreign shares
CENTRAL HUIJIN ASSET MANAGEMENT LTD. 60,206,850 RMB ordinary shares 60,206,850
HONG KONG SECURITIES CLEARING 34,168,330 RMB ordinary shares 34,168,330
COMPANY LIMITED
National Social Security Fund 418 18,840,000 RMB ordinary shares 18,840,000
Ningbo Asia Paper Tube Carton Co., Ltd. 18,400,000 RMB ordinary shares 18,400,000
VANGUARD TOTAL INTERNATIONAL STOCK 14,771,945 Domestic listed 14,771,945
INDEX FUND foreign shares
VANGUARD EMERGING MARKETS STOCK 13,121,946 Domestic listed 13,121,946
INDEX FUND foreign shares
Basic Pension Insurance Fund 1,208 Portfolio 10,717,400 RMB ordinary shares 10,717,400
Related party relationship or acting in concert A shareholder, Chenming Holdings (Hong Kong) Limited, which
among the top ten shareholders of non – is an overseas legal person, is a wholly-owned subsidiary of a
restricted shares, and between the top ten shareholder, Shouguang Chenming Holdings Company Limited,
shareholders of non-restricted shares and which is a state-owned legal person. Save for the above, it is not
the top ten shareholders aware that any other shareholders of tradable shares are persons
acting in concert. It is also not aware that any other shareholders
of tradable shares are related to each other.
Securities margin trading of top 10 ordinary Chenming Holdings Company Limited held 457,322,919 RMB
shareholders ordinary shares, of which 379,522,919 shares were held through
ordinary account and 77,800,000 shares were held through credit
guarantee security account.
Ningbo Asia Paper Tube Carton Co., Ltd. held 18,400,000 RMB
ordinary shares, of which 0 share was held through ordinary
account and 18,400,000 shares were held through credit guarantee
security account.
94 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIIIChanges in Share Capital and Shareholders
III. Shareholders and beneficial controllers (Cont’d)
1. Total number of shareholders and shareholdings (Cont’d)
Whether an agreed repurchase transaction was entered into during the reporting period by the top 10 ordinary
shareholders and top 10 shareholders of non-restricted shares of the Company
Yes √ No
The top 10 ordinary shareholders and top 10 shareholders of non-restricted shares.
2. Controlling shareholders of the Company
Nature of controlling shareholder: regional state-owned enterprise
Type of controlling shareholder: legal person
Name of controlling Legal
shareholders representative Date of establishment Enterprise code Principal business
CHENMING HOLDINGS COMPANY Chen Hongguo 30 December 2005 91370783783485189Q Investment in paper making,
LIMITED electricity, heat and arboriculture
by its own capital
Shareholdings of controlling shareholders who have Save for the Company, Chenming Holdings Company Limited does not have control
control or hold shares in other domestic or overseas over or hold any equity interest of other domestic or overseas listed companies.
listed companies during the reporting period
Change of controlling shareholders during the reporting period
Applicable √ Not applicable
There was no change in the controlling shareholders of the Company during the reporting period.
2020 ANNUAL REPORT 95
VIIIChanges in Share Capital and Shareholders
III. Shareholders and beneficial controllers (Cont’d)
3. Beneficial controller of the Company and persons acting in concert
Nature of the beneficial controller: Regional state-owned assets administration authority
Type of the beneficial controller: legal person
Legal
representative/
Person in charge Date of
Name of beneficial controller of the unit establishment Enterprise code Principal business
State-owned Assets N/A 1 August 1991 N/A Responsible for the
Supervision and management and
Administration Bureau of capital operation of the
Shouguang City state-owned assets of
enterprises and business
units in Shouguang city.
Shareholdings of beneficial Save for the Company, State-owned Assets Supervision and Administration Office
controller who has control of Shouguang City is also the beneficial controller of Shandong Molong Petroleum
or holds shares in other Machinery Co. Ltd.
domestic or overseas listed
companies during the
reporting period
96 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIIIChanges in Share Capital and Shareholders
III. Shareholders and beneficial controllers (Cont’d)
3. Beneficial controller of the Company and persons acting in concert (Cont’d)
Change of beneficial controller during the reporting period
Applicable √ Not applicable
There was no change in the beneficial owner of the Company during the reporting period.
Chart illustrating the relationship between the Company and the beneficial controller
State-owned Assets Supervision and
Administration Commission of
Shouguang City
100%
Shandong Shouguang Jinxin Investment
Development Holdings Group Co., Ltd.
45.21%
Chenming Holdings Limited
100%
Chenming Holdings 15.32%
(Hong Kong) Limited
12.20%
Shandong Chenming Paper Holdings Limited
Beneficial controller controlling the Company through trust or other asset management method
Applicable √ Not applicable
4. Other legal person shareholders interested in over 10% of the shares of the Company
Applicable √ Not applicable
5. Restrictions on decrease in shareholding by controlling shareholders, beneficial controller,
reorganising party and other undertaking parties
Applicable √ Not applicable
2020 ANNUAL REPORT 97
IX Preference Shares
√ Applicable Not applicable
I. Issue and listing of Preference Shares during the past three years at the end of the reporting
period
√ Applicable Not applicable
With listing Information
Issue price Coupon Issue size permission Information of of changes to
Method Issue date (RMB/share) rate (share) Listing date (share) Delisting date use of proceeds proceeds
Private 16 March 2016 100 4.36% 22,500,000 8 April 2016 22,500,000 Not applicable http://www.cninfo.com.cn Not applicable
Private 16 August 2016 100 5.17% 10,000,000 12 September 2016 10,000,000 Not applicable http://www.cninfo.com.cn Not applicable
Private 21 September 2016 100 5.17% 12,500,000 24 October 2016 12,500,000 Not applicable http://www.cninfo.com.cn Not applicable
II. Holders of Preference Shares and their shareholdings
Unit: share
Total number of holders of 8 Total number of holders of 8
Preference Shares as at the end of Preference Shares as at the end of
the reporting period the month prior to the publication date
of this annual report
Holders holdings more than 5% of the Preference Shares of the Company or top ten holders of Preference Shares
Changes
Number of (increase
shares held or decrease)
at the end of during the Number of Number of
Nature of Percentage of the reporting reporting restricted non-restricted
Name of shareholders shareholders shareholding period period shares held shares held Share pledged or locked-up
Status of shares Number
BEIJING YIBEN ZHONGXING INVESTMENT Domestic non-state 27.78% 12,500,000 0 0 12,500,000 Pledged 12,500,000
MANAGEMENT CO., LTD. owned legal person
BANK OF COMMUNICATIONS Others 22.44% 10,100,000 0 0 10,100,000
INTERNATIONAL TRUST CO., LTD. – HUILI
NO.167 SINGLE CAPITAL TRUST
BANK OF COMMUNICATIONS Others 14.22% 6,400,000 0 0 6,400,000
INTERNATIONAL TRUST CO., LTD. – HUILI
NO.136 SINGLE CAPITAL TRUST
QILU BANK CO., LTD. – QILU BANK QUANXIN Others 13.33% 6,000,000 0 0 6,000,000
WEALTH MANAGEMENT PRODUCT SERIES
SHANGHAI SHIJIE BUSINESS CONSULTING CO., Domestic non-state- 9.20% 4,140,100 3,140,100 0 4,140,100
LTD. owned legal person
HENGFENG BANK CO., LTD. Domestic non-state- 8.89% 4,000,000 – 1,000,000 0 4,000,000
owned legal person
LEAD CAPITAL MANAGEMENT CO., LTD. – Others 2.62% 1,179,900 1,179,900 0 1,179,900
LEAD CAPITAL – LI DE YING NO. 2 ASSET
MANAGEMENT PLAN
98 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Preference Shares
II. Holders of Preference Shares and their shareholdings (Cont’d)
Holders holdings more than 5% of the Preference Shares of the Company or top ten holders of Preference Shares
Changes
Number of (increase
shares held or decrease)
at the end of during the Number of Number of
Nature of Percentage of the reporting reporting restricted non-restricted
Name of shareholders shareholders shareholding period period shares held shares held Share pledged or locked-up
Status of shares Number
LEAD CAPITAL MANAGEMENT CO., LTD.- Others 1.51% 680,000 680,000 0 680,000
LEAD CAPITAL – LI DE YING NO. 1 ASSET
MANAGEMENT PLAN
Description of different requirements on other terms Nil
of Preference Shares held other than dividend
distribution and residual property distribution
Related party relationship or acting in concert The aforesaid holders of Preference Shares, “BANK OF COMMUNICATIONS INTERNATIONAL TRUST CO., LTD. – HUILI NO.167 SINGLE CAPITAL
among the top ten holders of Preference Shares, TRUST” and “BANK OF COMMUNICATIONS INTERNATIONAL TRUST CO., LTD. – HUILI NO.136 SINGLE CAPITAL TRUST”, and “LEAD CAPITAL
and between the top ten holders of Preference MANAGEMENT CO., LTD. LEAD CAPITAL LI DE YING NO.1 ASSET MANAGEMENT PLAN” and “LEAD CAPITAL MANAGEMENT CO., LTD. LEAD
Shares and the top ten ordinary shareholders CAPITAL LI DE YING NO.2 ASSET MANAGEMENT PLAN”, are persons acting in concert. Save for the above, it is not aware that whether the remaining
holders of Preference Shares are persons acting in concert. It is also not aware that the top ten holders of Preference Shares and the aforesaid ordinary
shareholders are related to each other.
III. Profit distribution for Preference Shares
√ Applicable Not applicable
Profit distribution for preference shares during the reporting period
√ Applicable Not applicable
Whether it is in
compliance with
the conditions Whether Whether it
Distributed and the relevant Way of it was an participates in
Dividend amount (RMB) procedures of dividend accumulated distribution of
Date of Distribution Ratio (tax inclusive) distribution payment dividend remaining profit
17 March 2020 4.36% 98,100,000.00 Yes Cash No Yes
17 August 2020 5.17% 51,700,000.00 Yes Cash No Yes
18 August 2020 3.837246% 172,676,073.42 Yes Cash No Yes
21 September 2020 5.17% 64,625,000.00 Yes Cash No Yes
2020 ANNUAL REPORT 99
IX Preference Shares
III. Profit distribution for Preference Shares (Cont’d)
Distribution for Preference Shares of the Company for the past three years
Unit: RMB
Net profit
attributable to Percentage
shareholders of to the net profit
listed company attributable to Explanation on shortfall
under the shareholders of accumulated to the next
consolidated listed company accounting year due to
financial under the insufficient distributable
Distributed statements consolidated profits or portion can be
amount for the financial allocated to remaining profit
Year of distribution (tax inclusive) distribution year statements distribution
2020 323,390,968.66 1,712,029,078.52 18.89% Chenming You 02 and
Chenming You 03 participated
in the proposal of remaining
profit distribution for
RMB108,965,968.66 in 2020.
2019 387,101,073.42 1,656,566,584.88 23.37% Chenming You 01, Chenming
You 02 and Chenming You 03
participated in the proposal of
remaining profit distribution for
RMB172,676,073.42 in 2019.
2018 493,494,767.52 2,509,828,858.47 19.66% Chenming You 01, Chenming
You 02 and Chenming You 03
participated in the proposal of
remaining profit distribution for
RMB279,069,767.52 in 2018.
Any adjustment or change in profit distribution policy for preference shares
Yes √ No
Both earnings of the Company and retained profit of the parent company are positive during the reporting period but
without profit distribution for preference shares
Applicable √ Not applicable
Explanation on other matters regarding distribution for preference shares
√ Applicable Not applicable
Holders of Preference Shares participate in profit distribution in two portions, namely the fixed dividend distributed based
on a fixed dividend rate and the distribution of retained earnings realised for the year.
100 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Preference Shares
III. Profit distribution for Preference Shares (Cont’d)
1. Distribution of fixed dividend
According to the Articles of Association, the Company shall distribute fixed dividends to holders of the Preference
Shares at fixed dividend rate if there are distributable profits after making good losses and the contribution to
reserve fund according to law. The Board is authorised by the general meeting to declare and pay all dividends on
the Preference Shares in accordance with the issuance plan under the framework and principles considered and
approved in the general meeting in respect of the Preference Shares. The general meeting of the Company has the
right to cancel part of or all of the current dividends on the Preference Shares. However, when the general meeting
of the Company will consider the cancellation of part of or all of the current dividends on the Preference Shares, the
Company shall inform the holders of Preference Shares at least 10 working days before the date of dividend payment
in accordance with the requirements of the related authorities.
2. Participation in the distribution of retained earnings realised for the year
Holders of Preference Shares participate in the distribution of the retained earnings through receipt of cash which
is non-cumulative and non-deferrable. In the event of making good losses and the contribution to reserve fund
according to law, after receiving fixed dividends at fixed dividend rate as agreed, holders of Preference Shares can
also participate in the distribution of the retained earnings for the year in proportion. Specific terms are as follows: the
retained earnings for the year arises from net profit attributable to owners of the parent company on a consolidated
basis upon distribution of relevant fixed income to holders of financial instruments such as the Preference Shares
which may be classified under equity. 50% of the retained earnings shall be distributed to holders of Preference
Shares and ordinary shareholders. Holders of Preference Shares shall participate in the distribution of the retained
earnings by receiving cash dividends, and the ordinary shareholders shall participate in the distribution of the retained
earnings by receiving cash dividends or dividends on ordinary shares.
IV. Repurchase or conversion
Applicable √ Not applicable
There was no repurchase or conversion during the reporting period.
V. Resumption of voting rights of Preference Shares
1. Resumption and exercise of voting rights
Applicable √ Not applicable
2. Shareholders and beneficial owner involved in resumption of voting rights of Preference Shares
Applicable √ Not applicable
VI. Accounting policy and reasons thereof
√ Applicable Not applicable
Pursuant to requirements of Accounting Standard for Business Enterprises No. 22 – Recognition and Measurement of
Financial Instruments, Accounting Standard for Business Enterprises No. 37 – Presentation of Financial Instruments and
Provisions for Differentiation between Financial Instruments and Equity Instruments and Relevant Accounting Treatment, the
Preference Shares were accounted for as equity instruments as their terms satisfied requirements for such treatments.
2020 ANNUAL REPORT 101
X Directors, Supervisors and Senior Management and Staff
I. Changes in shareholding of Directors, Supervisors and Senior Management
Shares held Increase in Decrease in Other Shares held
as at the the number of the number of changes as at the
beginning of shares held shares held (increase or end of the
Start date End date the period during the during the decrease) period
Name Position Status Gender Age of the term of the term (shares) period (shares) period (shares) (shares) (shares)
Chen Hongguo Chairman In office M 56 6 September 2001 11 June 2022 11,080,044 0 0 20,000,000 31,080,044
Hu Changqing Vice Chairman In office M 55 23 June 2018 11 June 2022 42,857 0 0 5,000,000 5,042,857
Li Xingchun Vice Chairman In office M 55 11 June 2019 11 June 2022 0 0 0 5,000,000 5,000,000
Li Feng Director In office M 47 19 June 2020 11 June 2022 906,027 0 0 3,000,000 3,906,027
General manager 9 November 2019 9 November 2021
Han Tingde Director In office M 52 11 June 2019 11 June 2022 0 0 0 0 0
Li Chuanxuan Director In office M 43 11 June 2019 11 June 2022 0 0 0 0 0
Sun Jianfei Independent Director In office M 48 11 June 2019 11 June 2022 0 0 0 0 0
Yin Meiqun Independent Director In office F 50 11 June 2019 11 June 2022 0 0 0 0 0
Yang Biao Independent Director In office M 41 11 June 2019 11 June 2022 0 0 0 0 0
Li Kang Supervisor In office F 39 27 July 2020 11 June 2022 149,300 0 0 0 149,300
Pan Ailing Supervisor In office F 56 11 June 2019 11 June 2022 0 0 0 0 0
Zhang Hong Supervisor In office F 56 11 June 2019 11 June 2022 0 0 0 0 0
Li Xinggui Supervisor In office M 56 11 June 2019 11 June 2022 0 0 0 0 0
Qiu Lanju Supervisor In office F 47 11 June 2019 11 June 2022 0 0 0 0 0
Li Xueqin Deputy general manager In office F 55 1 September 2004 11 June 2022 861,322 0 0 3,000,000 3,861,322
Geng Guanglin Deputy general manager In office M 47 11 June 2019 11 June 2022 716,950 0 0 2,000,000 2,716,950
Li Weixian Deputy general manager In office M 39 6 November 2019 11 June 2022 240,200 0 0 2,000,000 2,240,200
Li Zhenzhong Deputy general manager In office M 47 20 March 2011 11 June 2022 113,000 0 0 2,000,000 2,113,000
Zhao Xuegang Deputy general manager In office M 48 11 June 2019 11 June 2022 0 0 0 0 0
Dong Lianming Financial controller In office M 46 12 October 2018 11 June 2022 69,600 0 0 1,000,000 1,069,600
Yuan Xikun Secretary to the Board In office M 35 16 May 2018 11 June 2022 44,700 0 0 300,000 344,700
Chu Hon Leung Hong Kong company In office M 38 11 June 2019 11 June 2022 0 0 0 0 0
secretary
Li Dong Supervisor Resigned M 38 13 December 2016 27 July 2020 75,000 0 0 0 75,000
Total 14,299,000 0 0 43,300,000 57,599,000
102 SHANDONG CHENMING PAPER HOLDINGS LIMITED
X Directors, Supervisors and Senior Management and Staff
II. Changes of Directors, Supervisors and Senior Management of the Company
√ Applicable Not applicable
Name Position Type Date Reason
Li Feng Director, General Elected 19 June 2020 Elected as a Director of the ninth session
manager of the Board at the 2019 annual general
meeting.
Li Kang Supervisor Elected 27 July 2020 Elected as a Supervisor of the Supervisory
Committee of the Company at the third
extraordinary general meeting in 2019.
Li Dong Supervisor Resignation 27 July 2020 Resignation from the position due to
personal reasons.
III. Employment
Professional background, major working experiences and current duties at the Company of Directors, Supervisors and the
Senior Management
1. Brief biographies of Directors
(1) Brief biographies of executive Directors
Mr. Chen Hongguo is a member of the Communist Party of the PRC. He holds a bachelor’s degree. He is a
senior economist and holds the titles including Nationwide Light Industry Top Ten Youth Experts (
), Labour Medal on Enriching Shandong Province ( ),
Excellent Entrepreneur of Shandong Province ( ), Nationwide May 1st Labor Medal (
), Nationwide Excellent Entrepreneur ( ) and USA RISI CEO of the Year (
” CEO ”). He is vice chairman of the China National Light Industry Council. He joined the Company
in 1987 and had held positions including chief officer of manufacturing section, chief officer of branch factory,
deputy general manager, Director of the Company and the chairman of Wuhan Chenming Hanyang Paper Co.,
Ltd. He is currently the chairman of the Company and a Party Committee Secretary. Mr. Chen Hongguo is the
spouse of Ms. Li Xueqin, a deputy general manager of the Company.
Mr. Hu Changqing is a member of the Communist Party of the PRC. He holds a bachelor ‘s degree. He joined
the Company in 1988. He had held various positions in the Company such as the chief of the technological
reform department, the chief officer of branch factory, the deputy general manager and the Director. He is
currently a director of Chenming Holdings Company Limited and a vice chairman of the Company.
Mr. Li Xingchun holds a doctorate from School of Engineering Management and Engineering at Nanjing
University and is a visiting professor of Shanghai Finance University. He has successively worked in Ctrip.com,
Fuyou Securities Co., Ltd. ( ) and Western Development Holdings Co., Ltd., accumulating
more than 30 years of experience in industry, securities, trust and other fields. He is currently the Chairman of
Leadbank Technology Ltd., external director of Jiangxi Dacheng State-owned Assets Management Co., Ltd.,
director of Western Leadbank Fund Management Co., Ltd., independent director of Huadian International Power
Co., Ltd., executive director of China Mergers and Acquisitions Association, vice chairman of its Shanghai
branch, and vice chairman of the Company.
2020 ANNUAL REPORT 103
X Directors, Supervisors and Senior Management and Staff
III. Employment (Cont’d)
1. Brief biographies of Directors (Cont’d)
(1) Brief biographies of executive Directors (Cont’d)
Mr. Li Feng is a member of the Communist Party of the PRC. He holds a bachelor’s degree. He joined the
Company in 1992 and had held different positions including the chief officer of manufacturing section and
assistant to the general manager of the Company, chairman, marketing director and deputy general manager
of Wuhan Chenming Hanyang Paper Holdings Co., Ltd. He is currently an executive Director and the general
manager of the Company. Mr. Li Feng is the younger brother of Ms. Li Xueqin, a deputy general manager of the
Company.
(2) Brief biographies of non-executive Directors
Mr. Han Tingde graduated with a bachelor’s degree. He was the deputy general manager and the general
manager of operational department of Jinan, Liaocheng and Linyi offices of Shandong Securities Co., Ltd.,
the deputy general manager and the general manager of operational department of Zibo and Jinan offices of
Tiantong Securities Co., Ltd. in China, the general management of each of the customer service department,
the brokerage headquarters and the legal affairs department, as well as a deputy general manager of the retail
headquarters of Zhongtai Securities Co., Ltd., etc. He is currently a non-executive Director of the Company.
Mr. Li Chuanxuan holds a doctorate in law. He is a professor at Fudan University, Shanghai. From 2008 to
2012, he was a lecturer in the Law School of Fudan University. From 2012 to 2013, he was a visiting scholar
of the Law School of Columbia University in the United States, focusing on the research on green finance laws
and policies. He is currently the secretary general of the Association of Shanghai Environmental Resources
Law ( ), the director of the Association of China Environmental Resources Law (
), the director of the Association of Shanghai Economic Law ( ), as well as
the evaluation expert of the National Judicial Verification of Environmental Damages ( ).
He has been selected into Shanghai Pujiang Talent Program. He has been in charge of and undertook over 10
national and provincial scientific research projects. Moreover, he has participated in the drafting of several laws
and regulations of different legislatures including the Standing Committee of the National People’s Congress,
the Ministry of Ecology and Environment and Shanghai National People’s Congress. He concurrently serves as
a director of Jiangsu Guanlian New Material Technology Co., Ltd., and is currently a non-executive Director of
the company.
(3) Brief biographies of independent non-executive Directors
Mr. Sun Jianfei holds a doctorate in finance. He was a lecturer at University of Nevada, Reno, and concurrently
served as the consultant of hedge funds such as Eagle Peak Fund LP. From August 2010 to February 2017,
he was an assistant professor at Antai College of Economics & Management, Shanghai Jiao Tong University.
He was selected in the National Academic Leadership Talent Programme in Accounting (Standby List) (
) organised by the Ministry of Finance, as well as the Shanghai Pujiang
Talent Programme ( ). From February 2017 to August 2020, he was a professor at Institute
for Social and Economic Research, Nanjing Audit University, and a part-time professor at Antai College of
Economics & Management and Advanced Institute of Finance, Shanghai Jiao Tong University. He is currently an
Associate professor of Shanghai Advanced Institute of Finance of Shanghai Jiao Tong University, independent
director of Zhejiang Yueling Co., Ltd., independent director of Nanya New Material Technology Co., Ltd.,
independent director of Suzhou Tianwo Technology Co., Ltd., and an independent Director of the Company.
104 SHANDONG CHENMING PAPER HOLDINGS LIMITED
X Directors, Supervisors and Senior Management and Staff
III. Employment (Cont’d)
1. Brief biographies of Directors (Cont’d)
(3) Brief biographies of independent non-executive Directors (Cont’d)
Mr. Yang Biao holds a doctorate in law, and is currently a professor and doctoral tutor in the School of Law
of Sun Yat-sen University. He is, among others, one of the “Guangzhou Top Ten Young and Middle-aged
Jurists”, an outstanding young talent in the “Guangdong Special Support Program”, a selected member in the
“Double Thousand Plan” ( ) of the Ministry of Education and the Central Politics and Law Committee, a
training candidate in the “Thousand-Hundred-Ten” project ( ) for universities in Guangdong Province,
a member of the Academy for East-Asian Tort Law (AETL), a member of the Expert Advisory Committee
to Guangdong People’s Procuratorate, a supervisory member and judicial advisory expert of the Standing
Committee of Guangzhou People’s Congress and an expert certified in Major Administrative Decision-Making
and Argumentation in Guangzhou. He has served in Guangdong High People’s Court and People’s Court
of Guangzhou Huangpu District. He has also served as a supervisor of Guangzhou Chuanwen Education
Consulting Co., Ltd., a supervisor of Dongguan Rural Commercial Bank Co., Ltd., a director of Guangzhou
Zhongda Nansha Technology Innovation Industrial Park Co., Ltd., a director of Guangzhou Zhongshan University
Science Park Co., Ltd., a director of Guangzhou Zhongda Intellectual Property Service Co., Ltd., Independent
director of Guangdong Guangzhou Daily Media Co., Ltd., independent director of Guangdong Yuehai Feed
Group Co., Ltd., independent director of Qiaoyi Logistics Co., Ltd., independent director of Guangdong Tianhe
Agricultural Resources Co., Ltd.. He is currently an independent Director of the Company.
Ms. Yin Meiqun is a university professor and a certified public accountant in China. She holds a doctorate in
accounting degree. She paid academic visits to Sweden, Finland, Denmark and the Iowa State University in the
United States. From 1993 to 2007, she was a professor in the department of accounting at Harbin University
of Science and Technology. She is a professor of Beijing International Studies University. She is currently
a representative of the 15th Beijing Municipal People’s Congress, a member of the Accounting Education
Committee of the Accounting Society of China, a council member of the Accounting Society of China, a
member of the IMA China Management Accounting Expert Committee, and an independent director of Beijing
Life Insurance Co., Ltd. She is currently an independent Director of the Company.
2. Brief biographies of Supervisors
Ms. Li Kang is a member of the Communist Party of the PRC. She holds a bachelor’s degree. She joined the
Company in 2001. She has successively served as the section chief, deputy minister, minister, assistant to the general
manager of the management section of purchasing department, and deputy financial controller of the Company. She
is currently a supervisor of the Company.
Ms. Pan Ailing is a Ph.D. in Economics and holds a post-doctoral degree in Financial Management. She is currently a
professor of the School of Management, an advisor to doctoral students, the chief of the Department of Accounting
and the chief of the Investment and Financing Research Centre ( ) in Shandong University and a
non-practising member of CICPA (Chinese Institute of Certified Public Accountants). She is also a director of the
Accounting Institute, Shandong Province ( ), a council member of Shandong Comparative Management
Association, a visiting professor at Soochow University in Taiwan, a visiting scholar at University of Connecticut in
the United States and a state-level candidate for the New Century Ten Million Talents Project ( “
”). She is a specialist entitled to the State Council Special Allowance ( ), and a Young and
Middle-aged Expert with Outstanding Contributions in Shandong Province ( ). She is
the chief expert of the Major Tender Projects of National Social and Science Fund (
). She has finished various research projects at national and provincial level. She is also an Independent director of
Shandong Xinhua Medical Equipment Co., Ltd., independent director of Lutai Textile Co., Ltd., independent director
of Shandong Denghai Seed Industry Co., Ltd., director of Shandong Internet Media Group Co., Ltd., independent
director of Shandong Sanwei Petrochemical Engineering Co., Ltd. She is currently a Supervisor of the Company.
2020 ANNUAL REPORT 105
X Directors, Supervisors and Senior Management and Staff
III. Employment (Cont’d)
2. Brief biographies of Supervisors (Cont’d)
Ms. Zhang Hong holds a doctoral degree in Economics, and is currently a professor and advisor to doctoral students
at Shandong University, head of a multinational corporation research institute, a non-practising member of the
Chinese Institute of Certified Public Accountants, a director of China Association of International Trade, a director
of Shandong Province External Trade Association, and an independent director of Shandong Zhangqiu Blower Co.,
Ltd., an independent director of Vosges Group Co., Ltd., an independent director of China National Heavy Duty Truck
Group Jinan Truck Co., Ltd. and Cisen Pharmaceutical Co., Ltd. She is currently a Supervisor of the Company.
3. Brief biographies of Senior Management
Mr. Li Feng is a member of the Communist Party of the PRC. He holds a bachelor’s degree. He joined the Company in
1992 and had held different positions including the chief officer of manufacturing section and assistant to the general
manager of the Company, chairman, marketing director and deputy general manager of Wuhan Chenming Hanyang
Paper Holdings Co., Ltd. He is currently an executive Director and the general manager of the Company. Mr. Li Feng
is the younger brother of Ms. Li Xueqin, a deputy general manager of the Company.
Ms. Li Xueqin is a member of the Communist Party of the PRC. She holds a bachelor’s degree. She was successively
awarded titles including “Model Worker in Shandong Province ( ), Model Worker in the Country (
) and Nationwide May 1st Labour Medal ( )” and a deputy of the Tenth, Eleventh, Twelfth
and Thirteenth National People’s Congress. She joined the Company in 1987 and had held the positions of the chief
of audit department and deputy general manager of the Company. She has been a deputy general manager of the
Company since March 2003. Ms. Li Xueqin is the spouse of Mr. Chen Hongguo, chairman of the Company.
Mr. Li Weixian graduated with a postgraduate degree. He joined the Company in 2002 and had held different positions
including the deputy manager of a Shenzhen coated paper subsidiary of the Company, manager of Shandong
Chenming Paper Sales Company Limited, vice chairman of a household paper company, deputy marketing director
and marketing director of a sales company and vice president of a group. He is currently chairman of the financial
division and the deputy general manager of the Company
Mr. Geng Guanglin is a member of the Communist Party of the PRC. He graduated with a diploma. He joined the
Company in 1992 and had held different positions including the chief officer of manufacturing section of the Company,
the deputy general manager of Chibi Chenming Paper Co., Ltd., the chairman of Wuhan Chenming Hanyang Paper
Holdings Co., Ltd., the chairman of Jilin Chenming Paper Co., Ltd., the chairman of Jiangxi Chenming Paper Co., Ltd.
and a Director of the Company. He is currently the deputy general manager of the Company.
Mr. Li Zhenzhong is a member of the Communist Party of the PRC. He holds a bachelor’s degree. He joined the
Company in 1995 and had served as principal representative of the Shanghai management region of a sales company,
sales manager of light weight coated cultural paper products, general manager of the Sales Company. He is currently
the deputy general manager of the Company.
Mr. Zhao Xuegang is a member of the Communist Party of China. He holds a postgraduate degree. He graduated
from the Economic Information Management School of Shandong Economics University, and obtained a Master’s
degree in Finance from Shandong University. After joining the Company in 2017, he served as the general manager of
the Financial Leasing Company and currently serves as the deputy general manager of the Company.
Mr. Dong Lianming is a member of the Communist Party of the PRC and an accountant. He holds a bachelor’s
degree. He joined the Company in 1997 and had held positions as the chief of accounting and auditing section under
the financial department of the Company, the deputy chief and chief of the financial department, chief accountant
of Jiangxi Chenming, chief accountant of Shandong Chenming Panels and financial controller and deputy general
manager of Zhanjiang Chenming. He is currently the financial controller of the Company.
106 SHANDONG CHENMING PAPER HOLDINGS LIMITED
X Directors, Supervisors and Senior Management and Staff
III. Employment (Cont’d)
3. Brief biographies of Senior Management (Cont’d)
Mr. Yuan Xikun is a member of the Communist Party of the PRC. He holds a bachelor’s degree in management. He
joined the Company in 2010 and had held positions as the accountant for consolidated financial statements in the
financial department of the Company, manager of disclosure department, security affairs specialist and chief of the
security investment section. He is currently the secretary to the Board of the Company.
Mr. Chu Hon Leung is a lawyer. He obtained a bachelor’s degree in business from Macquarie University, Sydney,
Australia, and a postgraduate diploma in law from The College of Law, London, England. He graduated from the City
University of Hong Kong and obtained a diploma in Hong Kong law. He had been a lawyer in local and international
law firms in Hong Kong and served and an internal consultant for leading Chinese asset management companies. He
has been a practicing lawyer in Hong Kong since 2009 and currently works for Li & Partners.
Employment at the shareholder of the Company
√ Applicable Not applicable
Whether receiving
any remuneration
Position at the or allowance from
Name of shareholder shareholder of the shareholder of
Name of employee of the Company the Company Start date of the term End date of the term the Company
Chen Hongguo Chenming Holdings Company Chairman and general 22 September 2016 29 December 2023 No
Limited manger
Hu Changqing Chenming Holdings Company Director 22 September 2016 29 December 2023 No
Limited
Li Xueqin Chenming Holdings Company Director 22 September 2016 29 December 2023 No
Limited
Geng Guanglin Chenming Holdings Company Director 22 September 2016 29 December 2023 No
Limited
Explanation of the Nil
employment at the
shareholder of the
Company
2020 ANNUAL REPORT 107
X Directors, Supervisors and Senior Management and Staff
III. Employment (Cont’d)
3. Brief biographies of Senior Management (Cont’d)
Employment at other units
√ Applicable Not applicable
Whether receiving
any remuneration or
allowance from the
Position at Start date End date shareholder of the
Name of employee Name of other units other units of the term of the term Company
Yang Biao Guangdong Guangzhou Daily Independent director 19 August 2019 19 August 2022 Yes
Media Co., Ltd.
Guangdong Tianhe Agricultural Independent director 17 May 2018 16 May 2021 Yes
Means of Production Co., Ltd.
Sun Jianfei Nanya New Material Technology Independent director 1 August 2017 8 October 2023 Yes
Co., Ltd.
Zhejiang Yueling Co., Ltd. Independent director 1 November 2016 6 November 2022 Yes
Suzhou Thvow Technology Co., Ltd. Independent director 8 May 2020 8 May 2023 Yes
Pan Ailing Shinva Medical Instrument Co., Ltd. Independent director 27 July 2020 27 July 2023 Yes
Lu Thai Textile Co., Ltd. Independent director 6 June 2016 10 June 2022 Yes
Shandong Xinneng Taishan Independent director 12 April 2019 12 April 2022 Yes
Power Generation Co., Ltd.
Shandong Sanwei Shihua Independent director 15 May 2020 15 May 2023 Yes
Engineering Company Limited
Zhang Hong Shandong Zhangqiu Blower Co., Ltd. Independent director 27 March 2019 26 March 2022 Yes
Sunvim Group Co., Ltd. Independent director 15 July 2019 26 May 2023 Yes
Sinotruck Jinan Truck Co., Ltd. Independent director 28 April 2020 28 April 2023 Yes
Cisen Pharmaceutical Co., Ltd. Independent director 28 November 2017 8 December 2023 Yes
Employment at other units Nil
Sanctions against current Directors, Supervisors and Senior Management of the Company and those who resigned
during the reporting period by securities regulatory authorities in the past three years
Applicable √ Not applicable
108 SHANDONG CHENMING PAPER HOLDINGS LIMITED
X Directors, Supervisors and Senior Management and Staff
IV. Remuneration of Directors, Supervisors and Senior Management
Decision process, basis for determining the remuneration and actual payment for the remuneration of
Directors, Supervisors and the Senior Management
(1) Determination basis for remuneration of Directors, Supervisors and the Senior Management: The annual remuneration
of each of the executive Directors and the Senior Management of the Company was in the band of RMB0.20 million to
5.00 million and the specific amount for each of them was determined by the remuneration committee based on the
main financial indicators and operation target completed by the Company, the scope of work and main responsibilities
of the Directors and Senior Management of the Company, the target completion of the Directors and Senior
Management as assessed by the duty and performance appraisal system, as well as business innovation capability
and profit generation ability of the Directors and the Senior Management. The annual remuneration of Supervisors
assuming specific managerial duties in the Company were determined by the general manager office of the Company
based on specific managerial duties assumed by them. Fixed annual remuneration policy was adopted on external
Supervisors who did not hold actual management positions in the Company. As approved by the first meetings of
the ninth session of the Board and the Supervisory Board as well as the 2019 first extraordinary general meeting,
the Company paid each of the independent non-executive Directors and non-executive Directors of the Company
allowance of RMB200,000 (before tax). The remuneration of external Supervisors amounted to RMB100,000 (before
tax). The travel expenses for attending board meetings, supervisory meetings and general meetings of the Company
and fees reasonably incurred in the performance of their duties under the Articles of Association by independent non-
executive Directors, non-executive Directors and external supervisors are reimbursed as expensed.
(2) Decision process for remuneration of Directors, Supervisors and Senior Management: In accordance with the relevant
policies and regulations such as the Implementation Rules Of The Remuneration And Assessment Committee
Under The Board, any remuneration plan for the Company’s executive Directors proposed by the remuneration and
assessment committee shall be agreed on by the Board and then submitted to the general meeting for consideration
and approval prior to implementation. Any proposal of remuneration distribution plan for the Senior Management
officers of the Company shall be submitted to the Board for approval. The remuneration of independent non-executive
Directors, non-executive Directors and external Supervisors of the Company shall be agreed on by the Board and
then submitted to the general meeting for consideration and approval prior to implementation.
(3) The remuneration and assessment committee, which was set up by the Board according to the resolution of the
general meeting, is mainly responsible to formulate the standards of, carry out appraisal in respect of the non-
independent Directors and Senior Management of the Company; formulate and examine the remuneration policy and
scheme of the non-independent Directors and Senior Management of the Company, and accountable to the Board.
2020 ANNUAL REPORT 109
X Directors, Supervisors and Senior Management and Staff
IV. Remuneration of Directors, Supervisors and Senior Management (Cont’d)
Remuneration of Directors, Supervisors and Senior Management
Unit: RMB’ 0,000
Total
remuneration Received
before tax remuneration
received from related
from the parties of the
Name Position Gender Age Status Company Company
Chen Hongguo Chairman M 56 In office 499.00 No
Hu Changqing Vice Chairman M 55 In office 300.00 No
Li Xingchun Vice Chairman M 55 In office 480.00 No
Li Feng Director, General manager M 47 In office 335.60 No
Han Tingde Director M 52 In office 20.00 No
Li Chuanxuan Director M 43 In office 20.00 No
Sun Jianfei Independent Director M 48 In office 20.00 No
Yin Meiqun Independent Director F 50 In office 20.00 No
Yang Biao Independent Director M 41 In office 20.00 No
Li Kang Supervisor F 39 In office 64.10 No
Pan Ailing Supervisor F 56 In office 10.00 No
Zhang Hong Supervisor F 56 In office 10.00 No
Li Xinggui Supervisor M 56 In office 20.30 No
Qiu Lanju Supervisor F 47 In office 64.10 No
Li Xueqin Deputy general manager F 55 In office 299.00 No
Geng Guanglin Deputy general manager M 47 In office 153.80 No
Li Weixian Deputy general manager M 39 In office 299.00 No
Li Zhenzhong Deputy general manager M 47 In office 181.20 No
Zhao Xuegang Deputy general manager M 48 In office 29.24 No
Dong Lianming Financial controller M 46 In office 152.00 No
Yuan Xikun Secretary to the Board M 35 In office 70.00 No
Chu Hon Leung Hong Kong company secretary M 38 In office 0 No
Li Dong Supervisor M 38 Resigned 0 Yes
110 SHANDONG CHENMING PAPER HOLDINGS LIMITED
X Directors, Supervisors and Senior Management and Staff
IV. Remuneration of Directors, Supervisors and Senior Management (Cont’d)
Directors and Senior Management of the Company granted share options as incentives during the reporting
period
√ Applicable Not applicable
Unit: share
Exercise price
Number of Number of of the shares Number of Number of
exercisable shares exercised Market price restricted Number of newly granted Number of
shares exercised during the at the end of stocks held unlocked restricted Grant price of restricted
during the during the reporting the reporting at the shares during shares during restricted shares held
reporting reporting period. period beginning the current the reporting share at the end
Name Position period period (RMB/share) (RMB/share) of the period period period (RMB/share) of the period
Chen Hongguo Chairman 0 0 0 6.42 0 0 20,000,000 2.85 20,000,000
Hu Changqing Vice-chairman 0 0 0 6.42 0 0 5,000,000 2.85 5,000,000
Li Xingchun Vice-chairman 0 0 0 6.42 0 0 5,000,000 2.85 5,000,000
Li Feng Director, General Manager 0 0 0 6.42 0 0 3,000,000 2.85 3,000,000
Li Xueqin Deputy general manager 0 0 0 6.42 0 0 3,000,000 2.85 3,000,000
Geng Guanglin Deputy general manager 0 0 0 6.42 0 0 2,000,000 2.85 2,000,000
Li Weixian Deputy general manager 0 0 0 6.42 0 0 2,000,000 2.85 2,000,000
Li Zhenzhong Deputy general manager 0 0 0 6.42 0 0 2,000,000 2.85 2,000,000
Dong Lianming Financial controller 0 0 0 6.42 0 0 1,000,000 2.85 1,000,000
Yuan Xikun Secretary to the Board 0 0 0 6.42 0 0 300,000 2.85 300,000
Total 0 0 0 0 43,300,000 43,300,000
Note (if any) Nil
2020 ANNUAL REPORT 111
X Directors, Supervisors and Senior Management and Staff
V. Personnel of the Company
1. Number of staff, specialty composition and education level
Number of staff at the Company (person) 3,232
Number of staff at major subsidiaries (person) 8,362
Total number of staff (person) 12,752
Total number of staff receiving remuneration during the period (person) 12,752
Number of retired/resigned staff the Company and its major subsidiaries are
required to compensate (person) 0
Specialty composition
Category of specialty composition Number of people (person)
Production staff 8,625
Sales staff 569
Technical staff 657
Financial staff 193
Administrative staff 1,571
Other staff 1,137
Total 12,752
Education level
Category of education level Number of people (person)
Postgraduate and above 41
Undergraduate 1,083
Post-secondary 2,743
Technical secondary and below 8,885
Total 12,752
112 SHANDONG CHENMING PAPER HOLDINGS LIMITED
X Directors, Supervisors and Senior Management and Staff
V. Personnel of the Company (Cont’d)
2. Remuneration policies
The remuneration of the employees of the Company includes their salaries, bonuses and other fringe benefits. Subject
to the relevant laws and regulations, the Company adopts different standards of remuneration for different employees,
which are determined based on their position, skill variety, performance etc. with reference to the remuneration level
in the labour market, the average level of salary in the society and the corporate reference line set by the government.
The Company provides various benefits to the employees, including social insurance, housing allowance and paid
leaves etc.
3. Training programmes
The Company attached great importance to personnel training and development work, cantered on the corporate
spirit of “Learning, Surpass and Leading” and the corporate employment concept of “training, introducing, using
and retaining people”, identified talents, cultivated talents, exercised and developed talents in innovative practice,
and built a career platform. In 2021, the training management work of the Company will focus on the overall goal of
“realising self-driving talent growth”. Through the two starting points of “talent echelon construction” and “training
system construction”, the Company will open up talent training and promotion channels; build all levels of talent
competency standards, hierarchical and categorised training of talents; organisation of key talents, compiling
excellent teaching materials; measures such as building training teams from the four dimensions of selection, training
and retention to consolidate the basic skills of training management. The Company also focused on the three teams
of “cadres”, “backbone” and “employees” to carry out training and management work, implement rolling reserve
echelon training, and focused on building the comprehensive capabilities of cadres; carry out the training of backbone
talents in the group departments and focused on improving the ability of production management personnel; focused
on job operation skills for employees, prepared job descriptions, formed cases, promoted and copied experience, and
effectively improved the training management level of the Company, improved the overall quality of all employees,
and promoted the high-quality development of the Company.
4. Labour outsourcing
Applicable √ Not applicable
2020 ANNUAL REPORT 113
XI Corporate Governance
I. Corporate governance in practice
The Company operated in compliance with the requirement of Companies Law ( ), Securities Law ( ), Code
of Corporate Governance for Listed Companies ( ), Rules Governing Listing of Stocks on Shenzhen Stock
Exchange ( ), the Listing Rules of Hong Kong Stock Exchange and the related requirements
as required by CSRC, and continued to improve and optimise its legal person governance structure during the reporting
period. The Company also continuously improved its internal control system and proactively carried out management works
in relation to investor relations during the reporting period, so as to further improve corporate governance standards and
promote the Company’s standardised operations. As of the end of the reporting period, the actual practice of corporate
governance complied with the requirements of the regulatory documents issued by the CSRC regarding the governance of
listed companies.
(I) Shareholders and general meeting
The Company had established a corporate governance structure that ensured shareholders’ ability to fully exercise
their rights and enjoy equal status. Shareholders enjoyed their rights and undertook corresponding obligations in
accordance with the shares held by them. The convening and holding of general meeting of the Company were legal
and compliant, and on the premise of guaranteeing the legality and effectiveness of the general meeting, both on-site
voting and online voting were provided as channels to participate in such meetings. Where significant matters which
had an impact on the interests of minority investors were being considered, the votes by minority investors were
counted separately for the convenience of shareholders and for the sake of making public and timely disclosures. At
the same time, investors present at the general meeting could communicate with the management of the Company in
person, which effectively safeguard the rights and demands of investors to participate in the Company’s management.
We ensured that all investors could participate in corporate governance on an equal basis, which effectively
safeguarded the legitimate interests of shareholders, especially those of minority shareholders.
(II) Controlling shareholder and the listed company
During the reporting period, the Company remained independent of its controlling shareholder, beneficial controllers
and related parties in terms of its business, assets, finance, personnel and organisations, and complied with the
relevant provisions of the China Securities Regulatory Commission on the independence of listed companies. The
controlling shareholders and beneficial controllers strictly regulated their behaviour, and exercised their rights and
performed their obligations in accordance with the laws. The Company had business independence and self-operation
capability. The Board, the Supervisory Committee and internal structure can operate independently.
(III) Directors and the Board
The Board of the Company has a total of 9 Directors, of which 3 are independent Directors. They are professionals
with professional knowledge in finance, law, management, etc., ensuring the quality and level of decision-making
by the Board. During the reporting period, all of the Directors of the Company were able to earnestly, faithfully, and
diligently perform their duties and powers as stipulated in the Articles of Association. The convening and holding of
Board meetings were in strict compliance with the Articles of Association and Rules of Procedure of Board Meetings
and other relevant provisions. The four special committees under the Board of the Company, namely the Strategic
Committee, the Audit Committee, the Nomination Committee and the Remuneration and Assessment Committee,
performed their duties normally and provided scientific and professional opinions for the decision-making of the
Board.
114 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XI Corporate Governance
I. Corporate governance in practice (Cont’d)
(IV) Supervisors and the Supervisory Committee
The supervisors of the Supervisory Committee of the Company has a total of 5 supervisors, including 3 shareholder
supervisors and 2 employee supervisors. The number and composition of the board of supervisors meet the
requirements of laws and regulations. The Supervisory Committee strictly followed the requirement of relevant
laws and regulations including the Companies Law, the Articles of Associations and the Rules of Procedure of the
Supervisory Committee in fulfilling its duties. In the spirit of being accountable to the shareholders and the Company,
the Supervisory Committee independently and effectively exercised its supervision and inspection functions. By
attending Board meetings and conducting regular inspections on the legal compliance of the Company’s operations
and finance, the Supervisory Committee supervised the decision-making procedures of the Board, resolutions and the
legal compliance of the Company’s operations, so as to safeguard the legitimate interests of the Company and the
shareholders.
(V) Information disclosure
The Company strictly enforced the relevant information disclosure regulations and fully fulfilled its information
disclosure obligations. The Company disclosed information in a timely and fair manner and ensured that the
information disclosed was true, accurate and complete, and did not contain false information, misleading statements
or major omissions. During the reporting period, the Company issued a total of more than 170 periodic reports, interim
announcements, and related documents through the designated information disclosure media, and a total of 220
periodic reports, interim announcements, and related documents through the website of Hong Kong Stock Exchange,
ensuring that all shareholders have fair access to company-related information and have full right to know
(VI) About prevention and control of insider information
During the reporting period, the Company amended the provisions of the “Registration Management System of
Personnel with Insider Information” to strengthen the confidentiality of insider information and improve the registration
and management of personnel with insider information. The Directors, Supervisors, Senior Management and other
related personnel of the Company were able to strictly observe their confidentiality obligations throughout the
preparation of periodic reports, temporary announcements and the planning of major events. There was no case
where insiders use inside information to buy and sell company shares before the disclosure of material and sensitive
information that affects the stock price of the Company, and there is no case where they are investigated by the
regulatory authorities.
Any material non-compliance of the regulatory documents on the governance of listed companies issued by the
CSRC in respect of actual governance of the Company
Yes √ No
There was no material non-compliance of the regulatory documents on the governance of listed companies issued by
the CSRC in respect of the actual governance of the Company.
2020 ANNUAL REPORT 115
XI Corporate Governance
II. Particulars about the independence in terms of businesses, personnel, assets, organisations,
and finance from the controlling shareholder
The Company was completely separated from the controlling shareholder in terms of business, personnel, assets,
organisations and finance. The Company had a comprehensive internal structure, independent and complete businesses as
well as the capability of self-operation.
1. In terms of business: the Company had its own R&D, production, procurement and sales system, and was completely
independent of controlling shareholder in terms of business. The controlling shareholder and its other subsidiaries
were not competitors of the Company in the same industry.
2. In terms of personnel: the Company had an independent workforce, and had established independent departments
including the research and development department, production department, administration department, finance
department, procurement department and sales department. The Company had also established a comprehensive
management system with respect to labour, personnel and salary. Personnel of the Company were independent of
the controlling shareholder. The Company’s Chairman was elected at the general meeting, while the general manager,
deputy general manager, secretary to the Board, chief financial officer and other senior management members all
worked at and received remuneration from the Company. They did not receive remuneration from related companies
of the controlling shareholder, nor did they serve at any position therein other than a director or supervisor. The
appointment of the Company’s Directors, supervisors and senior management was conducted through legal
procedures and in strict compliance with the relevant requirements of Companies Law and the Articles of Association.
None of the controlling shareholders interfered with the Company’s Board, or the appointment and dismissal
decisions at general meetings.
3. In terms of assets: the title relationship between the Company and the controlling shareholder was clear, and the
Company’s funds, assets and other resources were not illegally occupied or dominated by the controlling shareholder.
The Company’s assets were complete, and possessed production equipment, auxiliary production equipment, patents
and other assets that were in line with its production and operation scope. The Company had complete control and
dominance over all assets.
4. In terms of organisations: the Board, Supervisory Committee, management and other internal organisations of the
Company operated independently. Each functional department was completely separated from the controlling
shareholder in terms of authority, personnel, etc. There was no subordinate relationship between the controlling
shareholder and its functional departments, and the Company and its functional departments. The Company’s
independence in terms of its production, operation and management was not affected by the controlling shareholder.
5. In terms of finance: the Company had its own finance department, accounting and auditing system and financial
management system, and was able to make independent financial decisions, with a standardised financial accounting
system and financial management system for subsidiaries. None of the controlling shareholders interfered with the
Company’s finance and accounting activities. The Company had a separate account in a commercial bank and there
was no sharing of bank accounts with the controlling shareholder. The Company reported on tax return and fulfilled its
tax obligations independently in accordance with the law.
III. Competition in the industry
Applicable √ Not applicable
116 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XI Corporate Governance
IV. Annual general meeting and extraordinary general meeting convened during the reporting
period
1. General meetings during the reporting period
Attendance
rate of
Meeting Type of meeting investors Convening date Disclosure date Disclosure index
2020 first extraordinary general Extraordinary general 3.41% 9 March 2020 10 March 2020 http://www.cninfo.com.cn
meeting meeting
2020 second extraordinary Extraordinary general 9.03% 15 May 2020 16 May 2020 http://www.cninfo.com.cn
general meeting meeting
2020 First Class Meeting for Class Meeting 7.74% 15 May 2020 16 May 2020 http://www.cninfo.com.cn
Holders of Domestic-listed
Shares
2020 First Class Meeting for Class Meeting 14.94% 15 May 2020 16 May 2020 http://www.cninfo.com.cn
Holders of Overseas-listed
Shares
2019 annual general meeting Annual general meeting 29.39% 19 June 2020 20 June 2020 http://www.cninfo.com.cn
2020 third extraordinary Extraordinary general 29.89% 27 July 2020 28 July 2020 http://www.cninfo.com.cn
general meeting meeting
2020 fourth extraordinary Extraordinary general 29.78% 27 August 2020 28 August 2020 http://www.cninfo.com.cn
general meeting meeting
2020 fifth extraordinary Extraordinary general 24.21% 21 December 2020 22 December 2020 http://www.cninfo.com.cn
general meeting meeting
2. Extraordinary general meeting requested by holders of the Preference Shares with voting rights
restored
Applicable √ Not applicable
2020 ANNUAL REPORT 117
XI Corporate Governance
V. Performance of Independent Directors during the reporting period
1. Attendance of Independent Directors at Board meetings and general meetings
Attendance of Independent Directors at Board meetings and general meetings
Number of
attendance
required for Board Attendance Attendance Absence Absent from
meetings during Attendance at at Board at Board from Board meetings Attendance
Name of Independent the reporting Board meetings meetings by meetings Board twice in a row at general
Directors period in person communication by proxy meetings (in person) meetings
Sun Jianfei 14 0 14 0 0 No 0
Yin Meiqun 14 0 14 0 0 No 0
Yang Biao 14 0 14 0 0 No 3
None of the independent Directors was absent from the Board meeting twice in a row.
2. Objections from Independent Directors on related issues of the Company
Were there any objections on related issues of the Company from the Independent Directors?
Yes √ No
There was no objection on related issues of the Company from the Independent Directors during the reporting period.
118 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XI Corporate Governance
V. Performance of Independent Directors during the reporting period (Cont’d)
3. Other details about the performance of duties by the independent Directors
Were there any suggestions from the independent Directors adopted by the Company?
√ Yes No
Explanation on the adoption or non-adoption with related suggestions from the independent Directors
During the reporting period, the independent Directors of the Company focused on the operation of the Company
and performed their duties strictly in accordance with relevant laws and regulations and the Articles of Association.
They provided a lot of valuable professional recommendations on optimising the Company’s system and decision on
daily operation. They also issued independent and fair opinion on matters arising during the reporting period which
requested opinions from Independent Directors. This helped optimise the supervisory system of the Company, as well
as protecting the legal rights of the Company and all shareholders.
Publication time Subject matter Opinion
21 February 2020 Independent opinions on Delay in Increase of Shares of the Company by Agreed
the Controlling Shareholder
27 March 2020 Independent opinions on the Company’s internal control self-assessment Agreed
report, particulars and independent opinions on external guarantees of
the Company, independent opinions on determination of remuneration
of Directors, Supervisors and senior management for 2019, independent
opinions on the use of proceeds by related parties and related party
transactions, independent opinions on provision of guarantee for
comprehensive credit line of relevant subsidiaries, independent
opinions on appointment of the auditor for 2020, independent opinions
on corrections of accounting errors and retrospective restatement,
independent opinions on expected daily connected transactions for 2020,
independent opinions on the re-election of Director, independent opinions
on Financial Assistance from a Subsidiary to Its Investee, and independent
opinions on provision for impairment of assets for 2019
30 March 2020 Independent opinions on the Implementation of the 2020 Restricted A Agreed
Share Incentive Scheme of the Company
29 May 2020 Independent opinions on Matters Relating to Adjustments to the 2020 Agreed
Restricted A Share Incentive Scheme, Independent opinions on Grant of
Restricted Shares to the Participants
19 June 2020 Independent opinions on the Estimated 2020 Securities Investment Quota Agreed
17 July 2020 Independent opinions on the Capital Increase of the Holding Subsidiary Agreed
and the Introduction of Strategic Investors
10 August 2020 Independent opinions on the use of proceeds by controlling shareholders Agreed
and other related parties and on external guarantees
29 September 2020 Independent opinions on the Capital Increase and the Introduction of a Agreed
Strategic Investor by a Holding Subsidiary
4 December 2020 Independent opinions on the Acquisition of Non-controlling Interest in a Agreed
Subsidiary and External Guarantee, Independent opinions on the External
Guarantee under the Equity Transfer
23 December 2020 Independent opinions on the capital increase of a subsidiary by Changjiang Agreed
Chenming Equity Investment Fund
2020 ANNUAL REPORT 119
XI Corporate Governance
VI. Performance of duties by special committees under the Board during the reporting period
(I) Audit Committee
1. The following major tasks were completed in 2020:
(1) it conducted pre-audit communication with external auditing institution engaged by the Company in
respect of the 2019 financial report auditing, reviewed the 2019 auditor’s report and financial report, which
were submitted to the Board of the Company for consideration and approval;
(2) it conducted research and review on the independence, professional competence, investor protection
ability, and practice qualifications of Grant Thornton, and agreed to propose to the Board that Grant
Thornton be appointed as the audit agency of the Company for 2020;
(3) it reviewed the 2020 first quarter report of the Company as of 31 March 2020, which was submitted to the
Board for consideration and approval;
(4) it reviewed the 2020 interim financial statements as of 30 June 2020, which were submitted to the Board
for consideration and approval;
(5) it reviewed the 2020 third quarter report of the Company as of 30 September 2020, which was submitted
to the Board for consideration and approval.
2. Auditing work conducted on the 2020 financial report of the Company is as follows:
(1) it convened a meeting to review with due consideration the 2020 auditing plan and the related information
of the Company with the auditing certified public accountants and the finance department of the
Company prior to the on-site audit, and negotiated and determined the schedule of an audit of the 2020
financial statements of the Company with certified accountant of Grant Thornton, which was responsible
for the Company’s auditing work during the year;
(2) with due consideration, it reviewed the draft of financial statements of the Company prior to an annual
onsite audit performed by the auditing certified public accountants and issued its approval to audit;
(3) it kept in close contact with the auditor upon the annual on-site audit performed by the auditing certified
public accountants and issued a letter to the auditor to urge that they submit the auditor’s report on
schedule;
(4) it reviewed the financial statements of the Company again upon the issue of preliminary opinion on the
annual audit by the auditing certified public accountants appointed for the annual audit, and considered
the financial statements of the Company to be true, accurate and complete to reflect the overall position
of the Company;
(5) it reviewed the 2020 report on internal audit and self-assessment report on internal controls of the
Company as of 31 December 2020.
120 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XI Corporate Governance
VI. Performance of duties by special committees under the Board during the reporting period
(Cont’d)
(II) Remuneration and Assessment Committee
The Remuneration and Assessment Committee under the Board of the Company were primarily responsible for
formulating the remuneration and assessment for the Directors and the Senior Management of the Company and
formulating and examining the remuneration package of the Directors and the Senior Management of the Company,
and accountable to the Board. During the reporting period, the Company held two meetings of the Remuneration
and Assessment Committee of the Board. The Remuneration and Assessment Committee formulated the 2019
remuneration package of the Directors and the Senior Management of the Company, which was arrived at based on
the operation conditions of 2019 and assessment of the Directors and the Senior Management of the Company. The
Remuneration and Assessment Committee reviewed the 2020 A-Share Restricted Share Incentive Plan (Draft) and
2020 A-Share Restricted Share Incentive Plan Evaluation and Management Measures and submit them to the Board
for consideration.
(III) Strategy Committee
The Strategy Committee conducted research on major investment decisions of the Company and made
recommendations, and inspected and evaluated the implementation of related matters. At the same time, the Strategy
Committee actively discussed the Company’s future long-term strategic development plan based on the Company’s
industry characteristics and development stage in combination with the Company’s production and operation
conditions, providing valuable and constructive opinions for the company’s steady development.
On 10 August 2020, the Proposal for the Second Phase of Huanggang Chenming Construction Project was reviewed
and approved by the Strategy Committee for the first meeting of the Strategy Committee in 2020 and submitted to the
Board for consideration.
(IV) Nomination Committee
The nomination committee was established under the Board of the Company. Its members were composed of three
Directors, of which two were independent Directors; there is one chairman, which is assumed by an independent
Directors. The nomination committee is responsible for reviewing and making recommendations on Director
candidates, manager candidates and other senior management personnel who need to be appointed by the Board,
making recommendations to the Board on the appointment and re-appointment of Directors, and on the skills and
knowledge required for Directors to serve on the Board, Experience, background, gender and other characteristics
are considered while balancing the diversity of Directors, improving the efficiency of the Board and ensuring the
benefits of the diversity of the Board. During the reporting period, the first meeting of 2020 reviewed and approved
the “Regarding the by-election The Director’s Proposal” agreed that Li Feng was a candidate for the Ninth Board of
Directors and submitted it to the fourth meeting of the Ninth Board of Directors for review and approval.
2020 ANNUAL REPORT 121
XI Corporate Governance
VII. Performance of duties by the Supervisory Committee
Were there any risks of the Company identified by the Supervisory Committee when performing its duties during the
reporting period?
Yes √ No
None of those issues under the supervision was objected by the Supervisory Committee during the reporting period.
VIII. Assessment and incentive mechanism for the Senior Management
The senior management of the Company is assessed on monthly and annually basis. Monthly assessments were conducted
in line with the direction of the annual major tasks, and were focused on appraisals of two fixed indicators, namely the
completion status of each month and the evaluation on important performance indicators. It was carried out monthly by
way of cross assessment and supervision among the related departments. The annual assessments were carried out by the
Remuneration and Assessment Committee with reference to the results of monthly assessments and overall performances
during the year, including the integrated quality of Senior Management and internal training of talents.
IX. Internal control
1. Particulars of material deficiencies in internal control detected during the reporting period
Yes √ No
During the reporting period, no major defects in internal control were found.
2. Self-assessment Report on Internal Controls
Date of Disclosure of Assessment Report on Internal Controls 26 March 2021
Index of Assessment Report on Internal Controls Disclosure http://www.cninfo.com.cn
Percentage of Total Assets Included in Assessment to Total Assets in
Consolidated Financial Statements of the Company 99.40%
Percentage of Revenue Included in Assessment to Revenue in Consolidated
Financial Statements of the Company 99.60%
122 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XI Corporate Governance
IX. Internal control (Cont’d)
2. Self-assessment Report on Internal Controls (Cont’d)
Basis for identifying deficiencies
Type Financial reporting Non-financial reporting
Qualitative criteria Indicators of material deficiencies in the Indicators of material deficiencies in the
internal control of financial reporting include: internal control of non-financial reporting
ineffective control environment, material loss include: major failure as a result of the decision
to and adverse impact on the Company as a making process; lack of control system or
result of misconduct by Directors, Supervisors occurrence of systematic failure in principal
and senior management; material misstatement activities and lack of effective compensation
of non-exceptional incidents; ineffectiveness in control, high turnover rate of mid to senior level
supervision of internal control of the Company management and senior technical staff; failure
by the Board, or its delegated authorities, and to address the findings of internal control
the internal audit department. assessment, in particular material deficiencies;
Indicators of major deficiencies in internal and other factors which impose material
control of financial reporting include: failure adverse impact on the Company. Indicators
in selecting and applying accounting of major deficiencies in internal control of
policies in accordance with generally nonfinancial reporting include: general failure
accepted accounting principles; failure to as a result of the decision-making process;
establish procedures and control measures deficiencies in major business procedure or
to prevent corrupt practices; failure to system; high turnover rate of key staff; failure
establish corresponding control mechanism to address the findings of internal control
for the accounting of unusual or special assessment, in particular major deficiencies;
transactions or failure to implement or set and other factors which impose great adverse
up the corresponding compensation control; impact to the Company. Indicators of general
failure to reasonably ensure the truthfulness deficiencies in internal control of non-financial
and accuracy in the preparation of financial reporting include: low efficiency of decision
statement, as a result of one or more making process; deficiencies in general
deficiencies in the control of financial reporting business procedure or system; high turnover
as of the end of the period. rate of employees; and failure to rectify general
General deficiencies: other deficiencies in deficiencies.
internal control that do not constitute material
or major deficiencies.
Quantitative criteria General deficiencies: deviation of less than or General deficiencies: quantitative criterion
equal to 0.1% from the target of accounting (financial loss) less than RMB5,000,000;
error/the total revenue; Major deficiencies: major deficiencies: quantitative criterion
deviation of 0.1% – 0.5% from the target of (financial loss) between RMB5,000,000
accounting error/the total revenue; material and RMB20,000,000; material deficiencies:
deficiencies: deviation greater than 0.5% quantitative criterion (financial loss) over
from the target of accounting error/the total RMB20,000,000.
revenue.
Number of material deficiencies in financial reporting: (number) 0
Number of material deficiencies in non-financial reporting: (number) 0
Number of major deficiencies in financial reporting: (number) 0
Number of major deficiencies in non-financial reporting: (number) 0
2020 ANNUAL REPORT 123
XI Corporate Governance
X. Auditor’s report on internal control
√ Applicable Not applicable
Auditor’s opinion contained in the Auditor’s report on internal control
We are of the opinion that Shandong Chenming Paper Holdings Limited had in all material aspects maintained effective
internal control over the financial statements in accordance with the Basic Internal Control Norms for Enterprises as of 31
December 2020.
Disclosure of Auditor’s Report on Internal Control Disclosed
Date of Disclosure of Auditor’s report on internal control 26 March 2021
Index of Auditor’s Report on Internal Control Disclosure http://www.cninfo.com.cn
Type of Opinion in Auditor’s Report on Internal Control Standard and unqualified opinion
Material deficiencies in non-financial reporting No
Any opinions of non-standardisation set out in the Auditor’s Report on Internal Control issued by accountants
Yes √ No
Auditor’s Report on Internal Control issued by accountants was in line with Directors’ opinions contained in Self-assessment
Report
√ Yes No
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited
(I) Compliance with the Code on Corporate Governance
The Company maintained high standards of corporate governance through various internal controls. The Board
reviewed the corporate governance practices of the Company from time to time to enhance the corporate governance
standards of the Company.
Save for the details set out in III Board, IV Chairman and General Manager and XVII Communications with
shareholders in this section, the Company had fully complied with all the principles and code provisions of the Code
on Corporate Governance as set out in Appendix 14 to the Hong Kong Listing Rules during the reporting period.
(II) Securities transactions by Directors
The Directors of the Company confirmed that the Company had adopted the Model Code for Securities Transactions
by Directors of Listed Companies as set out in Appendix 10 to the Hong Kong Listing Rules. Having made adequate
enquiries with all Directors and Supervisors of the Company, the Company was not aware of any information that
reasonably suggested that the Directors and Supervisors had not complied with the requirements as stipulated in this
code during the reporting period.
124 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(III) Board
The members of the Board of the Company are elected at the general meeting and held accountable to the general
meeting, and shall exercise the following functions and powers: (1) to be responsible for convening the general
meeting and to report on its work to the general meeting; (2) to carry out the resolutions of general meetings; (3)
to decide on the business plans and investment proposals of the Company; (4) to formulate the proposed annual
financial budget and final accounts of the Company; (5) to formulate the plan for profit distribution and the plan
making up losses of the Company; (6) to formulate plans for the increase or reduction in the registered capital of the
Company and for the issue and listing of Company’s debentures or other securities; (7) to draft plans for material
acquisition and repurchase of the Company’s own shares; (8) to draft plans for the merger, division or dissolution or
the change of formation of the Company; (9) to decide on external investment, acquisition and disposal of assets,
pledge of assets, matter in relation to external guarantee, entrusted wealth management, connected transactions,
etc. within the scope of mandate of the general meeting; (10) to decide on the establishment of the Company’s
internal management organisation; (11) to employ or dismiss the manager or secretary to the Board of the Company;
to employ or dismiss the Senior Management, such as the deputy general manager(s) and personnel in charge
of financial affairs, as proposed by the general manager; and to decide on their remuneration and rewards and
punishments; (12) to formulate the basic management system of the Company; (13) to formulate proposals for
amending the Articles of Association; (14) to administrate matter related to information disclosure of the Company;
(15) to propose to the general meeting for the engagement or replacement of accounting firm performing audit for the
Company; (16) to review work reports from managers of the Company and to inspect on their work; (17) to exercise
the functions and powers as conferred upon by the Articles of Association or the general meeting.
The Board comprised four executive Directors: Chen Hongguo (Chairman), Hu Changqing, Li Xingchun and Li Feng;
two non-executive Directors: Han Tingde and Li Chuanxuan; and three independent non-executive Directors: Sun
Jianfei, Yin Meiqun and Yang Biao. Please refer to section X of this annual report for their brief biographies.
The Board is responsible for leading and monitoring the Company, and is wholly responsible for the administration and
supervision of the Company’s businesses to facilitate its success. The Executive Director or the senior management is
authorised to be responsible for the various divisions and functions and management of the processing. Directors of
the Company shall act objectively and make decisions in the interests of the Company. The management and senior
management of the Company held regular meetings with the Board to discuss the ordinary business operations
and performance of the Company, and carried out the relevant decisions of the Board. The Company will arrange
independent legal advice upon the request from the Directors or any committees of the Board, if the Board or any
committees of the Board consider it necessary to seek for independent professional advice.
Pursuant to Code A.1.8 of the code provisions, the Company should arrange appropriate insurance cover in respect
of legal action against its Directors. As at the date of this report, the Company has not reached an agreement with
the original insurance company, and therefore has not arranged relevant insurance cover for Directors. However, the
Company is currently under negotiation with another insurance Company with respect to director liability insurance in
2021.
2020 ANNUAL REPORT 125
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(III) Board (Cont’d)
During the reporting period, the Board held 14 meetings, 4 of which were regular meetings and 10 were extraordinary
meetings. None of the Directors were absent from any Board meetings.
Attendance at the relevant meetings (attention required/attended)
Remuneration
Audit Nomination and assessment Strategic
Board committee committee committee committee General
Name Position meetings meetings meetings meetings meetings meetings
I. Executive Directors
Chen Hongguo Chairman 14/14 N/A 1/1 N/A 1/1 8/0
Hu Changqing Vice Chairman 14/14 N/A N/A N/A 1/1 8/8
Li Xingchun Vice Chairman 14/14 N/A N/A 2/2 N/A 8/0
Li Feng Executive Director 8/8 N/A N/A N/A N/A 3/3
II. Non-executive Directors
Li Chuanxuan Director 14/14 4/4 N/A N/A N/A 8/1
Han Tingde Director 14/14 N/A N/A N/A N/A 8/1
III. Independent non-executive Directors
Sun Jianfei Independent Director 14/14 4/4 1/1 2/2 N/A 8/0
Yin Meiqun Independent Director 14/14 4/4 1/1 N/A N/A 8/0
Yang Biao Independent Director 14/14 N/A N/A 2/2 1/1 8/3
Save for those disclosed in the brief profile of Directors of the Company in this Report, none of the members of the
Board had any financial, business, family relations or material connections with each other.
The Board held 4 regular meetings during the year, each by giving a 10-day notice in advance to ensure that all
Directors could participate in discussions of matters in the agenda. Reasonable prior notification was given for the
other meetings of the Board to ensure all Directors could take time to attend.
All Directors had access to opinions and services of the secretary to the Board to ensure the procedures governing
the Board and all applicable regulations and rules were complied with.
126 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(III) Board (Cont’d)
Directors’ training and professional development
All newly appointed Directors are provided with necessary orientation information, with an aim to ensure that they will
have a better understanding of operations and business of the Company as well as relevant laws and regulations and
obligations under the Listing Rules.
Directors and Supervisors of the Company were arranged by the Company to attend training courses 2020 for
directors and supervisors held by China Securities Regulatory Commission, Shandong; and, briefing paper in respect
of amendments to Hong Kong Listing Rules prepared by Advisor to Hong Kong Law of the Company was distributed
to all Directors and Supervisors, the above of which were to ensure all Directors and Supervisors to comply with
relevant laws and sound corporate governance practice, and enhance their awareness of sound corporate governance
practice.
(IV) Chairman and General Manage
The chairman of the Company is Mr. Chen Hongguo, and the general manager of the Company is Mr. Li Feng. Please
refer to section X of this annual report for his brief biographies.
According to the Articles of Association of the Company, the chairman shall exercise the following powers: (1)
presiding over general meetings, and convening and presiding over Board meetings; (2) supervising and inspecting
the implementation of the resolutions of the Board; (3) signing the shares, the securities and bonds issued by the
Company; (4) signing important documents of the Board and other documents which are required to be signed by
legal representative of the Company; (5) performing the powers of a legal representative; (6) nominating candidates
for general manager for the Board; (7) exercising the special right to operate the Company in accordance with the
laws and acting for the benefits of the Company in the event of emergency situation as a result of act of God or
natural disaster, and reporting to the Board meetings and general meeting afterwards; and (8) exercising other powers
authorised by the Board.
The general manager shall exercise the following powers: (1) in charge of the operation and management of the
Company, and organising the implementation of the resolutions of the Board; (2) organising the implementation of
the Company’s annual business plans and investment plans; (3) drafting plans for the establishment of the internal
organisational structure of the Company; (4) drafting the basic management system of the Company; (5) formulating
specific rules and regulations for the Company; (6) proposing the appointment or dismissal of the deputy general
manager and chief financial officer; (7) appointing or dismissing management personnel other than those required
to be appointed or dismissed by the Board; (8) proposing the wages, welfare, rewards, and penalties of staff and to
decide the appointment or dismissal of staff of the Company; (9) proposing the convening of extraordinary meeting of
the Board; and (10) exercising other powers conferred by the Articles of Association of the Company and the Board.
2020 ANNUAL REPORT 127
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(V) Independent Non-executive Directors
There are three independent non-executive Directors in the Board, which is in compliance with the minimum
requirement of the number of independent non-executive directors set out in the Hong Kong Listing Rules. Yin Meiqun
and Sun Jianfe, the independent non-executive Directors of the Company, have appropriate accounting or related
financial management expertise, which is compliance with the requirement of Rule 3.10 of the Hong Kong Listing
Rules. Please refer to section X of this annual report for their brief biographies. The Company has received from each
of the independent non-executive Directors a confirmation of independence for the year pursuant to Rule 3.13 of the
Hong Kong Listing Rules and considered all of the independent non-executive Directors to be independent during the
year.
(VI) Terms of Directors
According to the Articles of Association of the Company, all Directors, including non-executive Directors, are elected
at general meetings with a term of three years from June 2019 to June 2022. They may be re-elected for another term
upon expiry of tenure.
(VII) Directors’ Responsibility for the Financial Statements
The Directors acknowledged their responsibility to prepare financial statements for each financial year which give
a true and fair view of the state of affairs of the Company. The Directors believed that the Company had adopted
and applied consistently appropriate accounting policies in preparing the financial statements in compliance with all
related accounting standards.
(VIII) Board Committees
Pursuant to Code on Corporate Governance, the Board has established four committees, namely, Audit Committee,
Remuneration and Assessment Committee, Strategic Committee and Nomination Committee, for overseeing particular
aspects of the Company’s affairs. Each Board Committee has its own defined written terms of reference. The written
terms of reference of each Board Committee are published on websites of stock exchange and the Company.
Save for requirements of Code on Corporate Governance, the Company also set up Strategic Committee, for
overseeing and studying long-term strategic development plan of the Company and making recommendations.
128 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(IX) Audit Committee
The Audit Committee of the Company comprises three members, including Yin Meiqun (as the chairman), Li
Chuanxuan and Sun Jianfei. Two of them, including the chairman, are independent non-executive Directors. The
primary duties of the Audit Committee are serving as a communication media between internal and external audit
and the related review and supervision. Yin Meiqun and Sun Jianfei have appropriate professional qualifications or
appropriate accounting or related financial management expertise, which is in compliance with the requirement of the
Hong Kong Listing Rules.
The primary duties of the Audit Committee of the Company are: (1) proposing the appointment or dismissal of the
external auditor; (2) supervising the internal control system of the Company and its implementation; (3) serving as
a communication media between internal and external audit; (4) auditing the financial information of the Company
and its disclosures; (5) reviewing the financial control, risk control and internal control system of the Company and
audit the significant connected transactions; (6) discussing the risk management and internal control system with
the management to ensure the management has performed its duties to establish effective systems. The discussion
should include the adequacy of resources, staff qualifications and experience, training programs and budget of the
accounting and financial reporting functions of the Company; (7) studying the major investigation findings on risk
management and internal control matters on its own initiative or as delegated by the Board and the management’s
response to these findings; (8) where the annual report includes statements in relation to the risk management and
internal control system of the Company, reviewing such statements prior to submission to the Board for approval; and
(9) dealing with other matters as delegated by the Board.
The Audit Committee discussed with the management of the Company the accounting standards and practices
adopted by the Group and discussed and reviewed this report, including the review of the financial statements of the
Group for the year ended 31 December 2020 prepared in accordance with China Accounting Standards for Business
Enterprises.
Particulars of the meetings held by the Audit Committee during the reporting period were detailed in part VI of this
section.
Risk Management and Internal Control
The Board is responsible for the risk management and internal control systems and reviewing their effectiveness.
Such systems are designed to manage rather than eliminate the risk of failure to achieve business objectives, and can
only provide reasonable but not absolute assurance against material misstatement or loss.
The Audit Committee (on behalf of the Board) oversees management in the design, implementation and monitoring
of the risk management and internal control systems, and the management has provided confirmation to the Audit
Committee (and the Board) on the effectiveness of these systems for the year ended 31 December 2020.
In respect of internal control system, procedures have been designed for safeguarding assets against unauthorised
use or disposition, ensuring the maintenance of proper accounting records for the provision of reliable financial
information for internal use or for publication, and ensuring compliance of applicable laws, rules and regulations.
2020 ANNUAL REPORT 129
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(X) Remuneration and Assessment Committee
The Remuneration and Assessment Committee of the Company comprises three members, including Yang Biao,
the Chairman, and other members, namely Li Xingchun and Sun Jianfei. Two members, including the Chairman,
are independent non-executive Directors, which is in compliance with Code on Corporate Governance Practices.
The Remuneration and Assessment Committee is primarily responsible for formulating the criteria of appraisal of
the Directors and managers and conducting the appraisal, and studying and formulating the remuneration policy
and package of the Directors and the Senior Management of the Company. The Remuneration and Assessment
Committee is accountable to the Board.
The primary duties of the Remuneration and Assessment Committee of the Company are: (1) formulating the
remuneration plan or package based on the major scope of work, duties and importance of the Directors and the
management and the remuneration level of other counterparts; (2) formulating the remuneration plan or package
which mainly includes but not limited to standards, procedures and a system for performance appraisals as well
as major plans and a system for rewards and sanctions; (3) examining the performance of the Directors, excluding
the independent non-executive Directors, and the Senior Management and conduct annual performance appraisals
for them; (4) supervising the implementation of the remuneration policy of the Company; and (5) dealing with other
matters as delegated by the Board.
Particulars of the meetings held by the Remuneration and Assessment Committee during the reporting period are
detailed in part VI of this section.
(XI) Nomination Committee
The Nomination Committee of the Company comprises three members, including Sun Jianfei (as the chairman), Chen
Hongguo and Yin Meiqun. Two of them, including the chairman, are independent non-executive Directors, which is
in compliance with Code on Corporate Governance Practices. The Nomination Committee is primarily responsible
for selecting candidates for directors and the management of the Company, determining the selection criteria and
procedure and making recommendations.
The primary duties of the Nomination Committee are (1) advising the Board on the size and composition of the Board
in light of the Company’s operating activities, asset scale and shareholding structure; (2) studying the selection criteria
and procedure for Directors and the management and advising the Board on the same; (3) extensively identifying
qualified candidates for Directors and the management; (4) examining candidates for Director and the management
and advising on the same; (5) examining other Senior Management staff pending referral to the Board for decision on
their employment and advising on the same; (6) advising to the Board on appointment and re-appointment of directors
and on skills, knowledge, experience, background, gender and other characteristics required in serving as a director
taking into consideration diversity, balance and efficiency of the Board and benefits thereto; (7) reviewing the Board
diversity policy, revising thereon in a timely manner and making relevant disclosure in the corporate governance report
in the corresponding annual report; and (8) dealing with other matters as delegated by the Board.
130 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(XI) Nomination Committee (Cont’d)
During the reporting period, the Nomination Committee, after studying the needs of the Company for new Directors
and managerial personnel and taking into consideration the Board diversity policy, identified suitable candidates for
Director and managerial positions through various channels (including from the Group internally and from the human
resources market). Upon acceptance of nomination by the nominated person, the Nomination Committee performed
qualification review on preliminary candidates by holding meetings, review criteria include the academic qualifications,
relevant experience and specialised skills of the preliminary candidates. One to two months prior to election of new
Directors, the Nomination Committee submitted recommendations and relevant materials of the directorial candidates
to the Board; prior to engaging new Senior Management, the Nomination Committee submitted recommendations
and relevant materials of the new Senior Management personnel to the Board.
Particulars of the meetings held by the Nomination Committee during the reporting period are detailed in part VI of
this section.
(XII) Strategic Committee
The Company set up a Strategic Committee which comprised three members, including Chen Hongguo, the
Chairman, and other members, namely, Hu Changqing and Yang Biao. The Strategic Committee is primarily
responsible for studying the long term strategic development and major investments of the Company and making
recommendations.
The primary duties of the Strategic Committee are (1) conducting research and submitting proposals regarding the
long term development strategic plan; (2) conducting research and submitting proposals regarding the financing
plans for major investments which require approval from the Board as stipulated in the Articles of Association of the
Company; (3) conducting research and submitting proposals regarding major capital operations and assets operation
projects which require approval from the Board as stipulated in the Articles of Association of the Company; (4)
conducting research and submitting proposals regarding other material matters that may affect the development of
the Company; (5) carrying out examination on the implementation of the above matters; (6) dealing with other matters
as delegated by the Board.
Particulars of the meetings held by the Strategic Committee during the reporting period are detailed in part VI of this
section.
(XIII) Auditor
On 19 June 2020, the 2019 general meeting of the Company approved a resolution to engage Grant Thornton (Special
General Partnership) as the domestic auditor of the Company for 2020 and be responsible for domestic auditing of
the Company for 2020.
(XIV) Remuneration for the Auditor
The financial statements for 2020 prepared in accordance with Accounting Standards for Business Enterprises by
the Group were audited by Grant Thornton (Special General Partnership). The Company paid the auditor in aggregate
RMB2,500,000 and RMB800,000 in respect of financial statements audit and non-audit services in relation to internal
control for 2020 respectively.
Grant Thornton (Special General Partnership) has stated their reporting responsibilities on the financial statements of
the Group in XIII. Financial Report.
2020 ANNUAL REPORT 131
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(XV) Supervisors and Supervisory Committee
The Supervisory Committee is accountable to the shareholders. It monitors the financial position of the Company
and the performance of the Directors, managers and Senior Management of the Company as to whether they are in
accordance with relevant requirements of the laws and regulations to protect the lawful rights of the Company and the
shareholders. The Supervisory Committee comprises three shareholder representatives and two staff representatives.
The shareholder representatives shall be elected and removed at a general meeting and the staff representatives shall
be elected and removed democratically by the staff of the Company.
Details of the work of the Supervisory Committee during the reporting period are set forth in part VII of this section.
(XVI) Company Secretary
During the year, the company secretary confirmed that he has received relevant professional training for not less than
15 hours in accordance with Rule 3.29 of the Listing Rules.
(XVII)Communications with Shareholders
The Company considers effective communication with Shareholders is essential to enable them to have a clear
assessment of the Group’s performance as well as accountability of the Board. Principal means of communication
with Shareholders of the Company are as follows:
Information disclosure on the Company’s website
The Company endeavours to disclose all material information about the Group to all interested parties as widely and
timely as possible. The Company maintains its website at www.chenmingpaper.com where important information
about the Group’s activities and corporate matters such as annual reports and interim reports to Shareholders,
announcements, business development and operations, corporate governance practices and other information are
available for review by Shareholders and other stakeholders.
When announcements are made through the Stock Exchange, the same information will be made available on the
Company’s website.
General meetings
The Company’s annual general meeting provides a useful platform for direct communication between the Board and
Shareholders. Various resolutions are proposed on each substantially separate issue at the general meetings. Save
for the annual general meeting held on 19 June 2020 by the Company, five extraordinary general meetings, 1 Class
Meeting for Holders of Domestically listed Shares and 1 Class Meeting for Holders of Overseas-listed Shares were
convened in 2020. The attendance record of Directors at each general meeting is set out below:
Name Directors attending general meetings in person
2020 first extraordinary general meeting Hu Changqing
2020 second extraordinary general meeting Hu Changqing, Yang Biao
2020 First Class Meeting for Holders of Domestic-listed Shares Hu Changqing, Yang Biao
2020 First Class Meeting for Holders of Overseas-listed Shares Hu Changqing, Yang Biao
2019 annual general meeting Hu Changqing, Li Chuanxuan, Han Tingde
2020 third extraordinary general meeting Hu Changqing, Li Feng
2020 fourth extraordinary general meeting Hu Changqing, Li Feng
2020 fifth extraordinary general meeting Hu Changqing, Li Feng
132 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(XVII)Communications with Shareholders (Cont’d)
General meetings (Cont’d)
The Company’s external auditor also attended the Annual General Meeting.
Code E.1.2 of the code provisions – This code provision requires the chairman to invite the chairmen of the audit,
remuneration and nomination committees to attend the Annual General Meeting.
Mr. Chen Hongguo, the chairman of the Company and its strategy committee, was absent from the annual general
meeting due to business commitments.
Code A.6.7 of the code provisions – This code provision requires independent non-executive Directors and other
non-executive Directors, as equal board members, should give the Board and any committees on which they serve
the benefit of their skills, expertise and varied backgrounds and qualifications through regular attendance and active
participation. They should also attend general meetings and develop a balanced understanding of the views of
shareholders.
Han Tingde, Li Chuanxuan, Sun Jianfei, Yin Meiqun and Yang Biao were absent from the 2020 first extraordinary
general meeting due to business commitments.
Han Tingde, Li Chuanxuan, Sun Jianfei and Yin Meiqun were absent from the 2020 second extraordinary general
meeting, 2020 First Class Meeting for Holders of Domestic-listed Shares and 2020 First Class Meeting for Holders of
Overseas-listed Shares due to business commitments.
Sun Jianfei, Yin Meiqun and Yang Biao were absent from the 2019 annual general meeting due to business
commitments.
Han Tingde, Li Chuanxuan, Sun Jianfei, Yin Meiqun and Yang Biao were absent from the 2020 third extraordinary
general meeting, 2020 fourth extraordinary general meeting and 2020 fifth extraordinary general meeting due to
business commitments.
Voting by poll
Resolutions put to vote at the general meetings of the Company are taken by poll. Procedures regarding the conduct
of the poll are explained to the shareholders at the commencement of each general meeting, and questions from
shareholders regarding the voting procedures are answered. The poll results are posted on the websites of the Stock
Exchange and the Company respectively on the same day.
2020 ANNUAL REPORT 133
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(XVII)Communications with Shareholders (Cont’d)
Shareholders’ right
1. Procedures for convening an extraordinary general meeting by Shareholder
Pursuant to Article 100 of the Articles of Association of the Company, Shareholder(s) alone or in aggregate
holding 10% or more of the Company’s shares shall be entitled to request the Board to convene extraordinary
general meetings, provided that such request shall be made in writing. The Board shall, in accordance with
provisions of the laws, administrative regulations and the Articles of Association, furnish a written reply stating
its agreement or disagreement to the convening of an extraordinary general meeting within ten days after
receiving such proposal of the same.
In the event that the Board agrees to convene an extraordinary general meeting, the notice of general meeting
shall be issued within five days after the passing of the relevant resolution of the Board. Any changes in the
original request made in the notice shall require prior approval of Shareholders concerned.
In the event that the Board does not agree to convene an extraordinary general meeting or does not furnish any
reply within ten days after receiving such proposal, Shareholder(s) alone or in aggregate holding 10% or more of
the Company’s Shares shall be entitled to propose to the Supervisory Committee the convening of extraordinary
general meeting, provided that such proposal shall be made in writing.
In the event that the Supervisory Committee agrees to convene an extraordinary general meeting, the notice of
general meeting shall be issued within five days after receiving such request. Any changes in the original request
made in the notice shall require prior approval of Shareholders concerned.
Failure of the Supervisory Committee to issue a notice of general meeting within the stipulated period shall
be deemed as failure of the Supervisory Committee to convene and preside over a general meeting, and
Shareholder(s) alone or in aggregate holding 10% or more of the Company’s shares for ninety consecutive days
or more shall be entitled to convene and preside over the meeting on a unilateral basis.
Pursuant to Article 101 of the Articles of Association of the Company, if Shareholders determine to convene a
general meeting on their own, they shall give a written notice to the Board and file the same with the local office
of CSRC at the place where the Company is located and the stock exchange for records. The shareholding
percentage of shareholders who convened shall not be lower than 10% prior to the announcement of
resolutions of the general meeting.
Shareholders who convened shall submit relevant certifications to the local office of CSRC at the place where
the Company is located and the stock exchange upon the issuance of the notice of general meeting and the
announcement of resolutions of the general meeting.
The Board and its secretary shall cooperate with respect to matters relating to general meetings convened
by Shareholders on their own. The Board shall provide Shareholder registers as of the date of shareholding
register. If a general meeting is convened by shareholders on their own, all necessary expenses incurred shall
be borne by the Company.
134 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(XVII)Communications with Shareholders (Cont’d)
Shareholders’ right (Cont’d)
2. Procedures for sending shareholders’ enquiries to the Board
Shareholders may at any time send their enquiries and concerns to the Board of the Company in writing through
the Company Secretary/Secretary to the Board whose contact details are as follows:
Secretary to the Board Hong Kong Company Secretary
Name Yuan Xikun Chu Hon Leung
Address No. 2199 East Nongsheng Road, 22/F, Universal Building, Central, Hong Kong
Shouguang City, Shandong Province
Telephone (86)-0536-2158008 +852-21629600
Facsimile (86)-0536-2158977 +852-25010028
Email chenmmingpaper@163.com liamchu@li-partners.com
The Company Secretary and the secretary to the Board shall forward shareholders’ enquiries and concerns
to the Board and/or relevant Board Committees of the Company, where appropriate, to answer shareholders’
questions.
3. Procedures for putting forward proposals of Shareholders at general meetings
Pursuant to Article 111 of the Articles of Association of the Company, shareholders individually or jointly holding
over 3% of the total shares of the Company with voting right are entitled to propose motions to the Company.
Shareholders individually or jointly holding over 3% of the total shares of the Company with voting right may
submit extraordinary motions to the Board or the secretary to the Board ten working days before the convening
of the General Meeting. The Board or the secretary to the Board shall issue supplementary notice of the General
Meeting to announce the extraordinary motions within two working days after receiving the proposed motions.
Save for provided above, the Board or Secretary to the Board shall not amend proposals stated in the notice of
general meeting or add new proposals therein following the notice of general meeting has been issued.
No voting or resolution shall be effected or adopted at the general meeting for proposals that have not been
stated in the notice of general meeting or that do not comply with provisions of the Articles of Association.
Extraordinary general meeting shall not resolve issues that are not contained in the notice.
Relationships with investors
The Company recognises its responsibility to explain its activities to those with a legitimate interest and to respond to
their questions. Investors are received and visited at appropriate times to explain the Group’s business. In addition,
questions received from the general public and individual shareholders are answered promptly. In all cases, great care
is taken to ensure that no price-sensitive information is disclosed selectively.
(XVIII) Internal Control
For details of internal control of the Company, please refer to IX. Internal Control hereunder.
2020 ANNUAL REPORT 135
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(XIX) Articles of Association
On 3 December 2019, the Company amended the Articles of Association. The amendments were primarily relating to
the time for convening general meetings. Memorandum of Association and the amended version of the new Articles of
Association of the Company are available on websites of the Company and Stock Exchange.
(XX) Board Diversity
On 21 August 2013, the Company formulated policies to diversify Board members and amended the implementing
rules of the nomination committee. Pursuant to the new policies, the nomination committee shall regularly review the
Board diversity policy to improve efficiency and ensure interest thereof.
Such policies are summarised as follows:
The Company recognises and embraces the benefits of having a diverse Board, and sees diversity at Board level as
an essential element in maintaining a competitive advantage. A truly diverse Board will include and make good use
of differences in the talents, skills, regional and industry experience, backgrounds, genders and other qualities of the
members of the Board. These differences will be considered in determining the optimum composition of the Board
and when possible should be balanced appropriately. All appointments of the members of the Board are made on
merit, and in the context of the talents, skills and experience of the Board as a whole.
The Nomination Committee of the Company reviews and assesses the composition of the Board and makes
recommendations to the Board on appointment of new directors of the Company. The Nomination Committee
also oversees the conduct of the annual review of the effectiveness of the Board. In reviewing and assessing the
composition of the Board, the Nomination Committee will consider the benefits of all aspects of diversity, including
without limitation those described above, in order to maintain an appropriate range and balance of talents, skills,
experience and backgrounds on the Board. In recommending candidates for appointment to the Board, the
Nomination Committee will consider candidates on merit against objective criteria and with due regard for the benefits
of diversity on the Board.
The composition of the Board of the Company is basically diversified. For details, please refer to (III) Composition of
the Board under section XI.
(XXI) Dividend policy
Based on the total ordinary share capital of 2,984,208,200 shares and the 589,005,236 simulated ordinary shares
converted from the second and third tranche of Preference Shares using a conversion ratio of 1 share valued at
RMB3.82 as at the end of 2020, a cash dividend of RMB1.85 (tax inclusive) per 10 shares will be distributed to
ordinary shareholders; a cash dividend of RMB1.85 (tax inclusive) per 10 simulated ordinary shares converted from
the Preference Shares will be distributed to holders of the second and third tranche of Preference Shares. No bonus
shares will be issued and there is no increase of share capital from reserves. A cash dividend of RMB552,078,517.00
will be distributed to holders of ordinary shares and a variable cash dividend of RMB108,965,968.66 will be distributed
to holders of the second and third tranche of Preference Shares. In other words, a cash dividend of RMB4.84 (tax
inclusive) per Preference Share with a nominal value of RMB100 each will be distributed to holders of the second and
third tranche of Preference Shares. If the total share capital of the company changes before the date of the equity
registration for the implementation of the equity distribution, it is proposed to maintain the total distribution unchanged
and adjust the distribution ratio per share accordingly.
136 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XII Corporate Bonds
Are there any corporate bonds offered to the public and listed on stock exchanges which do not become due as at the date of
approval of annual report or overdue but not fully settled?
Yes
I. Basic information on Corporate Bonds
Outstanding
amount of
the bonds
Name of bond Bond abbreviation Bond code Issue date Maturity date (RMB’0,000) Interest rate Payment method
The public issuance of the 17 Chenming 112570 17 August 21 August 9,000 7.28% Interest is paid annually. The principal
Corporate Bonds of Shandong Bond 01 2017 2022 amount and the last interest payment
Chenming Paper Holdings will be paid on the maturity date.
Limited to qualified investors
in 2017 (phase I)
The public issuance of the 18 Chenming 112641 29 March 2 April 35,000 7.60% Interest is paid annually. The principal
Corporate Bonds of Shandong Bond 01 2018 2023 amount and the last interest payment
Chenming Paper Holdings will be paid on the maturity date.
Limited to qualified investors
in 2018 (phase I)
Stock exchange on which Shenzhen Stock Exchange
Corporate Bonds are listed or
transferred
Investor eligibility arrangement Online subscription: Public investors with A share security account opened under China Securities Depository and Clearing Co., Ltd.
Offline subscription: Institutional investors with A share security account opened under China Securities Depository and Clearing Co., Ltd.
Interest payment of Corporate The payment of interest on the bonds of 17 Chenming Bond 01 was completed on 21 August 2020. For details, please refer to the
Bonds during the reporting Announcement on Payment of 2020 Interest with Respect to the First Tranche of Corporate Bonds Publicly Issued to Qualified Investors in
period 2017 as disclosed on 19 August 2020.
The payment of principal and interest for the bond repurchase portion of 18 Chenming Bond 01 was completed on 2 April 2019, and the
resale of the bonds was completed during the reporting period. The number of the resale was 3,500,000, and the average resale price was
RMB100 each. For details, please refer to the relevant announcements as disclosed on 19 February, 21 February, 25 February, 28 February,
31 March, 30 April and 1 June 2020.
Performance of relevant terms Both 17 Chenming Bond 01 and 18 Chenming Bond 01 attach with options for the issuer to adjust the coupon rate and for investors to
during the reporting period, resell. The issuer has the right to determine the adjustment to the coupon rate for the following 3 years at the end of the second year
for special terms such as and the adjustment to the coupon rate for the following year as the end of the fourth year. After issuing the announcement on whether
issuer or investor option and the coupon rate of the relevant tranche of bonds will be adjusted and the range of adjustment, the investors have the right to register for
interchangeable for Corporate reselling during the period as announced to resell all or part of the relevant tranche of bonds held to the issuer at par value.
Bonds (if any).
2020 ANNUAL REPORT 137
XII Corporate Bonds
II. Information on bond custodian and credit rating agency
Bond custodian:
Name GF Securities Co., Ltd. Office address 37th Floor, Taikang Contact person Xu Duwei Telephone of 021-38003800-
Insurance Building, No. contact person 3700
429 Nanquan North
Road, Pudong New Area,
Shanghai
Credit rating agency(ies) which conducted rating on Corporate Bonds during the reporting period:
Name China Chengxin Securities Rating Co., Ltd. Office address Building 6, Yinhe Soho, No. 2 Nanzhugan Hutong,
Chaoyangmennei Street, Dongcheng District,
Beijing
Reason of change, procedures to be performed and impacts on interests of investors, etc. in case No change during the reporting period.
the bond trustee and credit rating agency engaged by the Company during the reporting period
have changed (if applicable)
III. Use of proceeds from Corporate Bonds
Use of proceeds from Corporate Bonds and its The use of proceeds from issuance of Corporate Bonds has strictly
implementation completed relevant application and approval procedures. As at the
end of the reporting period, the proceeds from 17 Chenming Bond
01 and 18 Chenming Bond 01 were fully used.
Balance as at the end of the year (RMB’ 0,000) 0
Operation of special account for proceeds Special account for proceeds is used for the deposit of special
capital from bonds.
Is the use of proceeds consistent with the use of Consistent
proceeds guaranteed under the prospectus, proposed
use of proceeds and other agreement
IV. Credit rating of Corporate Bonds
On May 26, 2020 China Chengxin International Credit Rating Co., Ltd. (China Chengxin International) issued the “Follow-up
Rating Report” (2020) with Respect to the First Tranche of Corporate Bonds Publicly Issued to Qualified Investors in 2017”.
The credit rating of the company’s “17 Chenming Bond 01” is AA+, and the main credit rating of the company is AA+,
and the rating outlook is stable. For details, please refer to the company’s announcement dated 28 May 2020 on Juchao
Information Network.
On 26 May 2020, China Chengxin International issued the “Follow-up Rating Report” (2020) with Respect to the First
Tranche of Corporate Bonds Publicly Issued to Qualified Investors in 2018”, which assessed the Company’s “18 Chenming
Bond 01” credit rating as AA+. The main credit rating of the Company is AA+, and the rating outlook is stable. For details,
please refer to the announcement of the Company dated 28 May 2020 on Juchao Information Network.
138 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XII Corporate Bonds
IV. Credit rating of Corporate Bonds (Cont’d)
On 3 July 2020, China Chengxin International issued the “Announcement on Putting Shandong Chenming Paper Group
Co., Ltd. Main Body and Related Debt Credit Ratings on the Watch List for Possible Downgrades”, and decided to set the
company’s AA+ main credit rating and the AA+ credit ratings of “17 Chenming Bond 01” and “18 Chenming Bond 01” are
included on the watch list for possible downgrade. For details, please refer to the announcement of the Company dated 9
July 2020 on Juchao Information Network.
On 30 December 2020, China Chengxin International issued the “Announcement on Removing the Credit Rating of
Shandong Chenming Paper Group Co., Ltd. and Related Debts from the Watch List of Possible Downgrades and Adjusting
the Rating Outlook to Negative” and decided to maintain it The company’s subject credit rating is AA+, and the credit
ratings of “17 Chenming Bond 01” and “18 Chenming Bond 01” are maintained at AA+. The credit ratings of the above
entities and related debts are removed from the watch list for possible downgrade, and the rating outlook is adjusted to
negative. For details, please refer to the announcement of the Company dated 31 December 2020 on Juchao Information
Network.
V. Credit enhancement mechanism, repayment plan and other repayment guarantee measures
for Corporate Bonds
There was no change in credit enhancement mechanism, repayment plan and other repayment guarantee measures, which
were consistent with relevant commitments as set out in the prospectuses, during the reporting period.
VI. Convening of meeting for bondholders during the reporting period
During the reporting period, no meeting for bondholders was held.
VII. Performance of bond custodian during the reporting period
As the trustee of “17 Chenming Bond 01” and “18 Chenming Bond 01”, GF Securities Co., Ltd. continued to pay close
attention to matters that have a significant impact on the rights and interests of bondholders, actively performed the duties
of the trustee and safeguard the legal rights and interests of bondholders..
On 19 June 2020, GF Securities Co., Ltd. issued the “Interim Report on the Entrusted Management of Major Issues of
Corporate Bonds”; on 24 June 2020, GF Securities Co., Ltd. issued the “Fiduciary Management Affairs Annual Report
(2019) with Respect to the First Tranche of Corporate Bonds Publicly Issued to Qualified Investors in 2017”, “Fiduciary
Management Affairs Annual Report (2019) with Respect to the First Tranche of Corporate Bonds Publicly Issued to Qualified
Investors in 2018”. For details, please refer to the announcement of the Company dated on the same day on Juchao
Information.
2020 ANNUAL REPORT 139
XII Corporate Bonds
VIII. Major accounting data and financial indicators of the Company over the past two years as at
the end of the reporting period
Unit: RMB’ 0,000
Year-on-year
increase/decrease
Item 2020 2019 in percentage
EBITDA 681,034.08 689,484.08 -1.23%
Current ratio 70.29% 85.30% -15.01%
Gearing ratio 71.83% 73.11% -1.28%
Quick ratio 60.23% 76.24% -16.01%
Proportion of EBITDA to total debts 12.22% 11.32% 0.90%
Interest coverage ratio 1.96 1.70 15.29%
Cash interest coverage ratio 4.71 4.56 3.29%
EBITDA interest coverage ratio 3.02 2.34 29.06%
Loans payment ratio 100.00% 100.00% 0
Interest payment ratio 100.00% 100.00% 0
Major reason for more than 30% in year-on-year change for the above accounting data and financial indicators
Applicable √ Not applicable
IX. Interest payment on other bonds, debt and financing instruments during the reporting period
Unit: RMB
Amount of
Item interest payment
Corporate Bonds 1,036,089,112.24
Super & short-term commercial papers 384,100,500.00
Total 1,420,189,612.24
140 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XII Corporate Bonds
X. Bank credit obtained, its use and repayment of bank loans during the reporting period
During the reporting period, the Company obtained bank credit of RMB83,165 million, of which RMB44,270 million was
utilised with RMB38,895 million outstanding. The Company repaid bank loans of RMB30,646 million.
XI. Performance of relevant agreements or commitments under the prospectus of Corporate
Bonds during the reporting period
Nil
XII. Matters of significance during the reporting period
On 3 July 2020, China Chengxin International issued the “Announcement on Putting the Credit Rating of the Company’s
Main Body and Related Debts on the Watch List for Possible Downgrades”, and decided to include the Company’s AA+
main credit rating and “17 Chenming Bond 01”, “18 Chenming Bond 01” AA+ was included in the watch list for possible
downgrade; on December 30, 2020, the Company issued “Announcement Regarding the withdrawal of the credit rating
of corporate entities and related debts from the watch list for possible downgrade and the rating outlook is adjusted to
negative” and decided to maintain the Company’s main body credit rating at AA+, maintain the “17 Chenming Bond 01” and
“18 Chenming Bond 01” credit ratings at AA+, and withdraw the credit ratings of the above entities and related debts that
may be downgraded to watch list and upgrade the rating outlook to negative.
For details, please refer to the announcement of the Company dated 9 July 2020 and 31 December 2020 on Juchao.com.
XIII. Is there any guarantor for Corporate Bonds?
Yes √ No
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I. Auditor’s Report
Type of auditor’s opinion Standard and unqualified opinions
The date of the audit report signed 25 March 2021
Name of the auditor Grant Thornton (Special General Partnership)
Reference number of the auditor’s report Audit Report No. [ 371A005352 ] (2021)
Name of certified public accountants Liu Jian and Jiang Lei
Text of the auditor’s report
To all shareholders of Shandong Chenming Paper Holdings Limited:
I. Auditor’s opinion
We have audited the financial statements of Shandong Chenming Paper Holdings Limited (hereinafter “Chenming
Paper Company”), which comprise the consolidated and company balance sheets as at 31 December 2020, the
consolidated and company income statements, the consolidated and company cash flow statements and the
consolidated and company statements of changes in shareholders’ equity for 2020 and notes to the relevant financial
statements.
In our opinion, the accompanying financial statements were prepared in accordance with the Accounting Standards
for Business Enterprises in all material aspects and give a true and fair view of the consolidated and company financial
position of Chenming Paper Company as at 31 December 2020 and of its consolidated and company operating
results and cash flows for 2020.
II. Basis of opinions
We have conducted our audit in accordance with the Chinese Auditing Standards issued by the Chinese Institute of
Certified Public Accountants. Our responsibilities under those standards are further described in the responsibilities
of certified public accountants for the audit of the financial statements section of the auditor’s report. We are
independent of Chenming Paper Company in accordance with the ethical codes of Chinese certified public
accountants, and we have fulfilled our other ethical responsibilities in accordance with the codes. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
III. Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
financial statements for the current period. These matters were addressed in the context of our audit of the financial
statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.
(I) Share-based payments
For detailed disclosures of relevant information, please see note V. 25 and note XIII of the financial statements.
1. Details
Chenming Paper Company implemented a restricted share incentive scheme in 2020. The management
fees recognised for share-based payments in 2020 amounted to RMB32,486,900. As the recognition
of share-based payments requires significant audit estimate by the management of Chenming Paper
Company (hereinafter the “Management”). As parameters such as the number of exercisable shares are
subject to uncertainties, we have identified share-based payments as a key audit matter.
142 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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2. Application for auditing
We have carried out the following audit procedures for the recognition of share-based payments:
(1) we inspected the approved share incentive scheme, relevant board resolutions and the resolutions
of the general meetings, and inspected the relevant evidence of the implementation of the share
incentive scheme;
(2) we obtained and inspected the approved share incentive scheme, relevant board resolutions and
the resolutions of the general meetings, inspected the evidence related to the implementation of the
share incentive scheme, including but not limited the Announcement on Completion of Registration
of the Grant under the 2020 Restricted A Shares Incentive Scheme issued by Chenming Paper
Company;
(3) we inspected the Management’s basis for estimating the fair value on the date of grant under
the share incentive scheme, inspected the Management’s basis for estimating the number of
exercisable shares under the share incentive scheme as at 31 December 2020, and evaluated the
reasonableness of Management’s estimation;
(4) we recalculated the expenses recognised for the share incentive scheme in 2020; and
(5) we inspected whether the Management had made sufficient disclosure of the share incentive
scheme and relevant estimation.
(II) Recognition of revenue from machine-made paper
For detailed disclosures of relevant information, please see note V. 27 and VII. 46 of the financial statements.
1. Details
In 2020, Chenming Paper Company realised revenue of RMB30,736,518,000, of which
RMB26,799,197,500 was attributed to revenue of machine-made paper, accounting for 87.19% of the
revenue. For domestic machine-made paper sales business, Chenming Paper Company recognised the
revenue after the goods were delivered and signed by the customer for confirmation; for foreign machine-
made paper sales business, Chenming Paper Company recognised the revenue after the goods were
loaded on board and declared.
As revenue is one of the key performance indicators of Chenming Paper Company, and the revenue from
the sales of machine-made paper accounts for a relatively huge proportion of the total revenue due to its
enormous sales volume, there may be potential misstatement in relation to whether revenue recognition is
accounted for in the appropriate period of the financial statements, which has a significant impact on the
financial statements. Therefore, we have identified recognition of revenue from machine-made paper as a
key audit matter.
2. Application for auditing
We have carried out the following audit procedures for the recognition of revenue from machine-made
paper:
(1) we identified and evaluated and tested the effectiveness of the design and operation of key internal
controls conducted by the Management related to revenue recognition;
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(2) we conducted sampling inspections on sales contracts, identified contract terms and conditions
related to the transfer of control of the goods, assessed whether the timing of recognition of sales
revenue from Chenming Paper Company meets the requirements of the Accounting Standards for
Business Enterprises;
(3) we analysed revenue and gross profit by taking into account product types and identified whether
the abnormal fluctuations in the amount of revenue are reasonable in the current period;
(4) we inspected the occurrence of on-the-spot recognition of sales at the end of the inspection period
and inspected goods returns after the inspection period to determine the accuracy of revenue
recognition during the period;
(5) we collected samples from sales revenue recorded around the balance sheet date for cut-off
tests; verified delivery orders and other supporting documents to assess whether sales revenue is
recorded in the appropriate accounting period;
(6) we sought external confirmations for clients with larger sales during the period.
IV. Other information
The Management of Chenming Paper Company’ is responsible for other information. Other information includes
the information covered in the 2020 annual report of Chenming Paper Company, but does not include the financial
statements and our audit report.
Our audit opinions published in the financial statements do not cover other information and we do not publish any
form of assurance conclusion on other information.
In conjunction with our audit of the financial statements, our responsibility is to read other information, during which
we consider whether there is significant inconsistency or other material misstatement of other information with the
financial statements or what we have learned during the audit.
Based on the work we have performed, if we determine that there is a material misstatement of other information, we
should report that fact. In this regard, we have nothing to report.
V. Management and management responsibility for financial statements
The Management of Chenming Paper Company is responsible for the preparation of financial statements in
accordance with the requirements of the Accounting Standards for Business Enterprises to enable them to achieve
fair reflection, and to achieve the design, implementation and maintenance of necessary internal controls so that the
financial statements are free of material misstatements due to fraud or errors.
In the preparation of the financial statements, the Management is responsible for assessing the continuing operations
capabilities of Chenming Paper Company, disclosing issues related to going concern (if applicable), and applying
the going concern assumption unless the Management plans to liquidate Chenming Paper Company, terminate
operations or have no other realistic options.
The Management is responsible for supervising the financial reporting process of Chenming Paper Company.
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VI. Auditor’s responsibility for auditing financial statements
Our objective is to obtain reasonable assurance as to whether the entire financial statements are free from material
misstatement due to fraud or errors and to issue an audit report containing audit opinions. Reasonable assurance is
a high level of assurance, but it does not guarantee that an audit performed in accordance with auditing standards
can always discover a major misstatement when it exists. Misstatements may be caused by fraud or errors, and are
generally considered to be material if it is reasonably expected that misstatements, individually or in aggregate, may
affect the economic decision made by users of financial statements based on the financial statements.
In the process of conducting audit work in accordance with auditing standards, we use professional judgment and
maintain professional suspicion. At the same time, we also perform the following tasks:
(1) To identify and assess risks of material misstatement of financial statements due to fraud or errors, design
and implement audit procedures to address these risks, and obtain adequate and appropriate audit evidence,
together perform as a basis for issuing audit opinions. Since fraud may involve collusion, falsification, intentional
omission, misrepresentation or override of internal controls, the risk of failing to detect a material misstatement
due to fraud is higher than the risk of failing to detect a material misstatement due to an error.
(2) To understand audit-related internal controls to design appropriate audit procedures.
(3) To evaluate the appropriateness of accounting policies adopted by the Management and the reasonableness of
accounting estimates and related disclosures.
(4) To conclude on the appropriateness of Management’s use of the continuing operation assumption. At the
same time, according to the audit evidence obtained, it may lead to conclusions as to whether there are
significant uncertainties in matters or circumstances that have significant doubts about the ability of Chenming
Paper Company to continue its operations. If we conclude that there are significant uncertainties, the auditing
standards require us to request the users of the report to pay attention to the relevant disclosures in the financial
statements in the audit report; if the disclosure is not sufficient, we should publish modified audit report. Our
conclusions are based on the information available as of the date of the audit report. However, future events or
circumstances may cause Chenming Paper Company to not continue its operations.
(5) Evaluate the overall presentation, structure, and content of the financial statements and evaluate whether the
financial statements fairly reflect the relevant transactions and matters.
(6) To obtain sufficient and appropriate audit evidence on the financial information of entities or business activities
in Chenming Paper Company to express opinions on the financial statements. We are responsible for guiding,
supervising and executing group audits, and take full responsibility for the audit opinion.
We communicate with the Management on planned audit scope, time arrangements and major audit findings,
including communication of the internal control deficiencies that we identified during the audit.
We also provide statements to the Management on compliance with ethical requirements related to independence,
and communicate with the Management on all relationships and other matters that may reasonably be considered to
affect our independence, as well as related preventive measures (if applicable).
2020 ANNUAL REPORT 145
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From the matters we communicated with the Management, we determine which matters are most important for the
audit of the financial statements for the current period and thus constitute the key audit matters. We describe these
matters in our audit report, unless laws and regulations prohibit the public disclosure of these matters, or in rare
cases, if it is reasonably expected that the negative consequences of disclosing something in the audit report will
outweigh the benefits to the public interest, we determine that the matter should not be reported in the audit report.
Grant Thornton (Special General Partnership) Chinese Certified Public Accountant (Project Partner): Liu Jian
Beijing, China Chinese Certified Public Accountant: Jiang Lei
25 March 2021
II. Financial Statements
The unit in the notes to the financial statements is: RMB
1. Consolidated Balance Sheet
Prepared by: Shandong Chenming Paper Holdings Limited
31 December 2020
Unit: RMB
Item 31 December 2020 31 December 2019
CURRENT ASSETS:
Monetary funds 17,759,537,598.98 19,306,529,473.33
Deposit reservation for balance
Borrowings
Financial assets held for trading 192,907,800.62
Derivative financial assets
Bills receivable
Accounts receivable 1,984,931,665.82 2,525,083,311.03
Accounts receivable financing 488,385,666.76 442,915,861.70
Prepayments 964,290,512.36 603,573,549.08
Premiums receivable
Reinsurance premiums receivable
Reserves for reinsurance contract receivable
Other receivables 2,417,240,559.46 2,216,654,598.66
Including: Interest receivable
Dividend receivable 13,000,000.00
Buying back the sale of financial assets
Inventories 5,135,293,347.82 4,774,430,110.81
Contract assets
Assets held-for-sale
Non-current assets due within one year 4,222,744,207.34 6,974,539,613.30
Other current assets 2,716,918,695.85 8,108,707,394.70
Total current assets 35,882,250,055.01 44,952,433,912.61
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Item 31 December 2020 31 December 2019
NON-CURRENT ASSETS:
Loans and advances
Debt investments
Other debt investments
Long-term receivables 4,658,884,857.95 1,200,575,810.95
Long-term equity investments 3,906,158,402.45 3,606,339,023.74
Investment in other equity instruments
Other non-current financial assets 145,910,000.00 147,445,653.55
Investment property 5,943,159,568.00 5,082,362,293.11
Fixed assets 37,651,706,658.97 34,439,935,032.69
Construction in progress 179,857,941.83 5,476,122,928.95
Bearer biological assets
Oil and gas assets
Right-of-use assets 205,876,719.75 152,141,882.05
Intangible assets 1,774,624,509.33 1,781,061,904.51
Development expenditure
Goodwill 32,916,531.95 5,969,626.57
Long-term prepaid expenses 51,061,485.49 48,203,408.71
Deferred income tax assets 1,084,164,679.14 892,442,631.04
Other non-current assets 58,886,418.75 173,875,826.67
Total non-current assets 55,693,207,773.61 53,006,476,022.54
Total assets 91,575,457,828.62 97,958,909,935.15
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Item 31 December 2020 31 December 2019
CURRENT LIABILITIES:
Short-term borrowings 32,793,992,957.86 36,883,156,014.19
Borrowings from central bank
Loans from other banks
Financial liabilities held for trading
Derivative financial liabilities
Bills payable 2,998,936,736.34 1,515,048,206.00
Accounts payable 4,042,430,732.31 4,351,087,581.98
Advance receipts
Contract liabilities 1,051,147,044.74 968,082,063.13
Financial assets sold for repurchase
Deposits from customers and interbank
Customer brokerage deposits
Securities underwriting brokerage deposits
Employee benefits payable 232,376,585.31 190,229,883.52
Taxes payable 652,647,840.63 311,554,116.73
Other payables 1,956,715,367.83 2,594,249,626.54
Including: Interest payable 178,992,959.85 208,189,699.15
Dividend payable
Handling charges and commission payable
Due to reinsurers
Liabilities held-for-sale
Non-current liabilities due within one year 7,160,949,615.93 5,662,958,920.03
Other current liabilities 157,037,833.35 222,402,500.00
Total current liabilities 51,046,234,714.30 52,698,768,912.12
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Item 31 December 2020 31 December 2019
NON-CURRENT LIABILITIES:
Insurance contract reserve
Long-term borrowings 8,077,150,979.15 9,140,339,693.56
Bonds payable 1,536,877,351.46 1,258,270,909.49
Including: Preference Shares
Perpetual Bonds
Lease liabilities 60,271,769.90 59,697,128.65
Long-term payables 2,295,309,357.74 3,321,535,538.94
Long-term employee benefits payable
Provisions 325,259,082.28 325,259,082.28
Deferred income 1,637,996,636.51 1,771,013,335.11
Deferred income tax liabilities 6,572,535.97 1,411,125.59
Other non-current liabilities 789,521,686.07 3,042,841,328.86
Total non-current liabilities 14,728,959,399.08 18,920,368,142.48
Total liabilities 65,775,194,113.38 71,619,137,054.60
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Item 31 December 2020 31 December 2019
OWNERS’ EQUITY:
Share capital 2,984,208,200.00 2,904,608,200.00
Other equity instruments 5,473,500,000.00 7,465,500,000.00
Including: Preference Shares 4,477,500,000.00 4,477,500,000.00
Perpetual Bonds 996,000,000.00 2,988,000,000.00
Capital reserves 5,321,911,413.75 5,086,686,427.30
Less: Treasury shares 226,860,000.00
Other comprehensive income -561,686,607.66 -879,452,135.10
Special reserves
Surplus reserves 1,212,009,109.97 1,212,009,109.97
General risk provisions 74,122,644.20 74,122,644.20
Retained profit 9,999,764,028.74 9,306,269,617.38
Total equity attributable to owners of the Company 24,276,968,789.00 25,169,743,863.75
Minority interest 1,523,294,926.24 1,170,029,016.80
Total owners’ equity 25,800,263,715.24 26,339,772,880.55
Total liabilities and owners’ equity 91,575,457,828.62 97,958,909,935.15
Legal Representative: Financial controller: Head of the financial department:
Chen Hongguo Dong Lianming Zhang Bo
2. Balance sheet of the Company
Unit: RMB
Item 31 December 2020 31 December 2019
CURRENT ASSETS:
Monetary funds 4,720,330,804.07 9,001,257,324.52
Financial assets held for trading
Derivative financial assets
Bills receivable 1,470,720,000.00 3,254,460,000.00
Accounts receivable 694,836,561.24 39,204,670.00
Accounts receivable financing 24,339,933.19 189,873,567.14
Prepayments 1,697,770,445.12 722,472,479.01
Other receivables 10,637,425,503.02 13,975,590,537.58
Including: Interest receivable
Dividend receivable 200,000,000.00
Inventories 637,293,495.29 696,487,727.53
Contract assets
Assets held-for-sale
Non-current assets due within one year 146,934,211.22 129,546,826.00
Other current assets 45,764,272.71 80,815,659.84
Total current assets 20,075,415,225.86 28,089,708,791.62
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Item 31 December 2020 31 December 2019
NON-CURRENT ASSETS:
Debt investments
Other debt investments
Long-term receivables 64,762,373.99 418,750,862.51
Long-term equity investments 22,192,108,035.92 23,629,780,317.87
Investment in other equity instruments 3,000,000.00
Other non-current financial assets 141,910,000.00 147,445,653.55
Investment property
Fixed assets 3,984,339,880.51 3,901,007,932.88
Construction in progress 80,192,749.46 350,623,821.42
Bearer biological assets
Oil and gas assets
Right-of-use assets
Intangible assets 534,900,368.31 446,430,156.00
Development expenses
Goodwill
Long-term prepaid expenses
Deferred income tax assets 418,717,829.13 426,711,909.98
Other non-current assets 110,930,000.00
Total non-current assets 27,416,931,237.32 29,434,680,654.21
Total assets 47,492,346,463.18 57,524,389,445.83
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Item 31 December 2020 31 December 2019
CURRENT LIABILITIES:
Short-term borrowings 10,929,616,612.59 11,601,509,632.09
Financial liabilities held for trading
Derivative financial liabilities
Bills payable 7,603,416,890.27 9,890,041,170.20
Accounts payable 812,111,491.23 833,526,295.40
Advances from customers
Contract liabilities 156,487,086.88 2,096,436,345.90
Staff remuneration payables 89,416,732.50 71,040,017.13
Tax payables 147,669,266.97 76,872,851.56
Other payables 5,869,352,883.62 6,426,648,847.95
Including: Interest payable 97,497,305.56 127,278,083.35
Dividend payable
Liabilities held-for-sale
Non-current liabilities due within one year 2,374,029,490.27 3,695,934,663.30
Other current liabilities 312,130,833.35 932,402,500.00
Total current liabilities 28,294,231,287.68 35,624,412,323.53
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Item 31 December 2020 31 December 2019
NON-CURRENT LIABILITIES:
Long-term borrowings 1,295,000,000.00 150,692,035.94
Bonds payable 439,957,250.00 89,070,000.00
Including: Preference Shares
Perpetual Bonds
Lease liabilities
Long-term payables 631,776,192.80 1,167,426,124.98
Long-term employee benefits payable
Provisions 325,259,082.28 325,259,082.28
Deferred income 38,017,165.55 42,070,840.27
Deferred income tax liabilities
Other non-current liabilities 1,194,883,344.67 2,789,283,340.67
Total non-current liabilities 3,924,893,035.30 4,563,801,424.14
Total liabilities 32,219,124,322.98 40,188,213,747.67
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Item 31 December 2020 31 December 2019
OWNERS’ EQUITY:
Share capital 2,984,208,200.00 2,904,608,200.00
Other equity instruments 5,473,500,000.00 7,465,500,000.00
Including: Preference Shares 4,477,500,000.00 4,477,500,000.00
Perpetual Bonds 996,000,000.00 2,988,000,000.00
Capital reserves 5,124,308,464.42 4,953,557,435.19
Less: Treasury shares 226,860,000.00
Other comprehensive income
Special reserves
Surplus reserves 1,199,819,528.06 1,199,819,528.06
Retained profit 718,245,947.72 812,690,534.91
Total owners’ equity 15,273,222,140.20 17,336,175,698.16
Total liabilities and owners’ equity 47,492,346,463.18 57,524,389,445.83
154 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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3. Consolidated Income Statement
Unit: RMB
Item Amount for 2020 Amount for 2019
I. Total revenue 30,736,517,996.90 30,395,434,073.35
Including: Revenue 30,736,517,996.90 30,395,434,073.35
Interest income
Premium earned
Handling charges and commission income
II. Total operating costs 29,056,210,362.62 28,390,081,416.99
Including: Operating costs 23,645,594,186.21 22,750,269,749.38
Finance expenses
Handling charges and commission expenses
Surrenders
Net claims paid
Net change in drawing of insurance contract reserves
Policyholder dividend expenses
Reinsurance premium expenses
Taxes and surcharges 250,528,855.40 275,933,439.81
Sales and distribution expenses 298,246,355.91 320,810,724.85
General and administrative expenses 1,025,420,660.39 1,134,725,391.84
Research and development expense 1,274,355,241.49 992,312,956.74
Finance expenses 2,562,065,063.22 2,916,029,154.37
Including: Interest expenses 3,125,361,069.00 3,573,865,213.86
Interest income 887,004,185.02 836,491,207.55
Plus: Other income 363,884,128.32 561,556,630.51
Investment income (“-” denotes loss) 173,363,537.49 174,000,822.89
Including: Investment income from associates and joint ventures 272,022,434.54 -2,995,932.01
Derecognition of revenue of financial assets measured at
amortised cost
Exchange gains (“-” denotes loss)
Net gains from hedging exposure (“-” denotes loss)
Gain on change in fair value (“-” denotes loss) 6,261,281.76 26,692,741.61
Credit impairment loss (“-” denotes loss) -651,724,871.57 -1,033,867,928.73
Loss on impairment of assets (“-” denotes loss) -13,573,717.76 -120,991,683.19
Gain on disposal of assets (“-” denotes loss) 26,203,497.56 -29,073,731.05
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Item Amount for 2020 Amount for 2019
III. Operating profit (“-” denotes loss) 1,584,721,490.08 1,583,669,508.40
Plus: Non-operating income 600,465,688.15 493,393,914.87
Less: Non-operating expenses 12,917,235.69 28,584,594.00
IV. Total profit (“-” denotes total loss) 2,172,269,942.54 2,048,478,829.27
Less: Income tax expenses 266,056,648.05 295,180,636.46
V. Net profit (“-” denotes net loss) 1,906,213,294.49 1,753,298,192.81
(I) Classification according to the continuity of operation
1. Net profit from continuing operations (“-” denotes net loss) 1,906,213,294.49 1,689,474,069.20
2. Net profit from discontinued operations (“-” denotes net loss) 63,824,123.61
(II) Classification according to ownership
1. Net profit attributable to shareholders of the Company 1,712,029,078.52 1,656,566,584.88
2. Profit or loss of minority interest 194,184,215.97 96,731,607.93
VI. Net other comprehensive income after tax 317,765,527.44 -142,931,954.09
Net other comprehensive income after tax attributable to shareholders of
the Company 317,765,527.44 -142,931,954.09
(I) Other comprehensive income not to be reclassified to profit and loss in
subsequent periods
1. Changes arising from remeasurement of defined benefit plans
2. Other comprehensive income not to be reclassified to profit or loss
under equity method
3. Changes in fair value of other equity instrument investments
4. Changes in fair value of enterprise’s own credit risk
5. Others
(II) Other comprehensive income that will be reclassified to profit and loss in
subsequent periods 317,765,527.44 -142,931,954.09
1. Other comprehensive income to be reclassified to profit or loss
under equity method
2. Changes in fair value of other debt investments
3. Amount of financial assets reclassified into other comprehensive
income
4. Provision for credit impairment losses of other debt investments
5. Cash flow hedging reserve
6. Exchange differences arising from translation of financial statements
denominated in foreign currencies 317,765,527.44 -142,931,954.09
7. Others
Net other comprehensive loss after tax attributable to non-controlling
interests
VII. Total comprehensive income 2,223,978,821.93 1,610,366,238.72
Total comprehensive income attributable to shareholders of the Company 2,029,794,605.96 1,513,634,630.79
Total comprehensive income attributable to minority interest 194,184,215.97 96,731,607.93
VIII. Earnings per share:
(I) Basic earnings per share 0.36 0.33
(II) Diluted earnings per share 0.36 0.33
For the business combination involving enterprises under common control during the reporting period, the net profit
realised by the parties being absorbed before the combination was nil (the same period last year: nil).
Legal Representative: Financial controller: Head of the financial department:
Chen Hongguo Dong Lianming Zhang Bo
156 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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4. Income statement of the Company
Unit: RMB
Item Amount for 2020 Amount for 2019
I. Revenue 8,510,073,793.88 6,914,154,801.19
Less: Operating costs 6,899,160,821.06 5,483,419,941.19
Taxes and surcharges 63,211,127.50 47,507,009.10
Sales and distribution expenses 7,441,664.84 10,628,480.40
General and administrative expenses 322,407,985.30 367,847,081.04
Research and development expense 286,590,211.63 292,447,426.29
Finance expenses 501,171,122.74 1,437,070,384.94
Including: Interest expenses 1,481,718,871.40 2,275,231,993.88
Interest income 1,057,852,559.80 980,330,079.03
Plus: Other income 59,165,073.44 78,722,787.60
Investment income (“-” denotes loss) 348,093,079.09 1,352,470,766.36
Including: Investment income from associates and joint ventures 6,412,281.95 -11,142,579.41
Derecognition of revenue of financial assets measured
at amortised cost
Net gains from hedging exposure (“-” denotes loss)
Gains on changes in fair value (“-” denotes loss) 9,464,346.45 46,445,653.55
Credit impairment loss (“-” denotes loss) 42,369,727.64 -128,688,655.59
Loss on impairment of assets (“-” denotes loss) -77,447,218.54
Gain on disposal of assets (“-” denotes loss) 40,134,455.47 -30,388,143.09
II. Operating profit (“-” denotes loss) 929,317,542.90 516,349,668.52
Plus: Non-operating income 5,225,205.90 11,140,162.55
Less: Non-operating expenses 1,891,387.34 19,138,740.53
III. Total profit (“-” denotes total loss) 932,651,361.46 508,351,090.54
Less: Income tax expenses 7,994,080.85 -122,850,888.03
IV. Net profit (“-” denotes net loss) 924,657,280.61 631,201,978.57
(I) Net profit from continuing operations (“-” denotes net loss) 924,657,280.61 631,201,978.57
(II) Net profit from discontinued operations (“-” denotes net loss)
2020 ANNUAL REPORT 157
XIII Financial Report
Item Amount for 2020 Amount for 2019
V. Net other comprehensive loss after tax
(I) Other comprehensive loss not to be reclassified to profit or loss
1. Changes arising from remeasurement of defined benefit plans
2. Other comprehensive income not to be reclassified to profit or
loss under equity method
3. Changes in fair value of other equity instrument investments
4. Changes in fair value of enterprise’s own credit risk
5. Others
(II) Other comprehensive income to be reclassified to profit or loss
1. Other comprehensive income to be reclassified to profit or loss
under equity method
2. Changes in fair value of other debt investments
3. Amount of financial assets reclassified into other comprehensive
income
4. Provision for credit impairment losses of other debt investments
5. Cash flow hedging reserve
6. Exchange differences arising from translation of financial
statements denominated in foreign currencies
7. Others
VI. Total comprehensive income 924,657,280.61 631,201,978.57
VII. Earnings per share:
(I) Basic earnings per share
(II) Diluted earnings per share
158 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
5. Consolidated cash flow statement
Unit: RMB
Item Amount for 2020 Amount for 2019
I. Cash flows from operating activities:
Cash received from sales of goods and rendering of services 35,114,699,022.80 34,573,214,070.98
Net increase in deposits from customers and other peer financial
institutions
Net increase in borrowings from central bank
Net increase in borrowings from other financial institutions
Premiums received from original insurance contracts
Net cash received from reinsurance business
Net increase in deposits and investments from policyholders
Interest, handling charges and commission received
Net increase in borrowings from banks and other financial institutions
Net increase in repurchase business capital
Net cash received from securities brokerage
Tax rebates received 71,675,835.40 111,119,105.01
Cash received relating to other operating activities 4,956,395,786.44 6,949,229,810.96
Subtotal of cash inflows from operating activities 40,142,770,644.64 41,633,562,986.95
Cash paid for goods and services 24,341,006,232.03 23,866,695,680.80
Net increase in loans and advances to customers
Net increase in deposits with central bank and other peer financial
institutions
Original insurance contract claims paid
Net increase in interbank borrowings
Interest, handling charges and commissions paid
Policyholder dividend paid
Cash paid to and for employees 1,421,974,787.06 1,457,717,966.62
Payments of taxes and surcharges 1,285,210,254.65 2,273,360,732.52
Cash paid relating to other operating activities 1,834,776,694.62 1,803,081,384.07
Subtotal of cash outflows from operating activities 28,882,967,968.36 29,400,855,764.01
Net cash flows from operating activities 11,259,802,676.28 12,232,707,222.94
2020 ANNUAL REPORT 159
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Item Amount for 2020 Amount for 2019
II. Cash flows from investing activities:
Cash received from investments 15,000,000.00 2,784,345.77
Cash received from investment income 26,760,712.33 12,000,000.00
Net cash received from disposal of fixed assets, intangible assets and
other long-term assets 131,924,763.00 137,211,301.99
Net cash received from disposal of subsidiaries and other business
units 217,547,669.15 215,421,083.24
Cash received relating to other investing activities 409,282,077.65 767,670,000.00
Subtotal of cash inflows from investing activities 800,515,222.13 1,135,086,731.00
Cash paid for purchase of fixed assets, intangible assets and other
long-term assets 254,202,396.70 1,112,186,863.71
Cash paid on investments 471,299,932.73 1,947,322,879.24
Net increase in pledge loans
Net cash paid for acquisition of subsidiaries and other business units 256,052,699.51
Cash paid relating to other investing activities 101,130,000.00
Subtotal of cash outflows from investing activities 981,555,028.94 3,160,639,742.95
Net cash flows from investing activities -181,039,806.81 -2,025,553,011.95
III. Cash flows from financing activities:
Cash received from investments 952,070,000.00 423,000,000.00
Including: Cash received from subsidiaries from minority investment 725,210,000.00 423,000,000.00
Cash received from borrowings 25,471,909,126.85 28,631,245,817.48
Cash received relating to other financing activities 5,230,346,076.92 5,866,106,002.62
Subtotal of cash inflows from financing activities 31,654,325,203.77 34,920,351,820.10
Cash repayments of amounts borrowed 30,646,227,554.94 30,767,815,349.31
Cash paid for dividend and profit distribution or interest payment 3,090,605,089.86 3,530,178,266.59
Including: Dividend and profit paid by subsidiaries to minority
shareholders 17,444,349.31 19,262,500.00
Cash paid relating to other financing activities 7,511,530,461.76 10,109,785,861.74
Subtotal of cash outflows from financing activities 41,248,363,106.56 44,407,779,477.64
Net cash flows from financing activities -9,594,037,902.79 -9,487,427,657.54
IV. Effect of foreign exchange rate changes on cash and cash equivalents 14,116,969.70 -210,956,768.56
V. Net increase in cash and cash equivalents 1,498,841,936.38 508,769,784.89
Plus: Balance of cash and cash equivalents as at the beginning of the
period 2,890,328,027.41 2,381,558,242.52
VI. Balance of cash and cash equivalents as at the end of the period 4,389,169,963.79 2,890,328,027.41
160 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
6. Cash flow statement of the Company
Unit: RMB
Item Amount for 2020 Amount for 2019
I. Cash flows from operating activities:
Cash received from sales of goods and rendering of services 8,315,495,593.76 7,719,183,653.24
Tax rebates received
Cash received relating to other operating activities 1,094,213,214.09 1,561,317,548.23
Subtotal of cash inflows from operating activities 9,409,708,807.85 9,280,501,201.47
Cash paid for goods and services 7,355,500,996.59 3,634,400,369.89
Cash paid to and for employees 413,161,984.36 496,342,845.44
Payments of taxes and surcharges 225,151,450.32 206,120,796.96
Cash paid relating to other operating activities 872,500,967.87 1,113,784,472.34
Subtotal of cash outflows from operating activities 8,866,315,399.14 5,450,648,484.63
Net cash flows from operating activities 543,393,408.71 3,829,852,716.84
II. Cash flows from investing activities:
Cash received from investments 1,481,345,237.36 228,794,345.77
Cash received from investment income 405,420,123.68 1,087,829,000.00
Net cash received from disposal of fixed assets, intangible assets and
other long-term assets 104,624,763.00 81,086,086.00
Net cash received from disposal of subsidiaries and other business
units
Cash received relating to other investing activities 409,282,077.65
Subtotal of cash inflows from investing activities 2,400,672,201.69 1,397,709,431.77
Cash paid for purchase of fixed assets, intangible assets and other
long-term assets 10,850,791.93 154,820,434.45
Cash paid on investments 82,290,000.00 1,278,000,000.00
Net cash paid for acquisition of subsidiaries and other business units
Cash paid relating to other investing activities 101,130,000.00
Subtotal of cash outflows used in investing activities 93,140,791.93 1,533,950,434.45
Net cash flows from investing activities 2,307,531,409.76 -136,241,002.68
2020 ANNUAL REPORT 161
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Item Amount for 2020 Amount for 2019
III. Cash flows from financing activities:
Cash received from investments 226,860,000.00
Cash received from borrowings 15,865,741,633.57 13,980,360,915.86
Cash received relating to other financing activities 5,490,509,924.46 5,007,324,754.27
Subtotal of cash inflows from financing activities 21,583,111,558.03 18,987,685,670.13
Cash repayments of amounts borrowed 16,517,425,606.56 10,970,294,184.80
Cash paid for dividend and profit distribution or interest payment 1,188,678,703.00 1,762,132,250.15
Cash paid relating to other financing activities 6,565,598,116.70 10,415,992,353.54
Subtotal of cash outflows from financing activities 24,271,702,426.26 23,148,418,788.49
Net cash flows from financing activities -2,688,590,868.23 -4,160,733,118.36
IV. Effect of foreign exchange rate changes on cash and cash equivalents 2,622,051.57 -4,354,937.11
V. Net increase in cash and cash equivalents 164,956,001.81 -471,476,341.31
Plus: Balance of cash and cash equivalents as at the beginning of the
period 136,328,721.71 607,805,063.02
VI. Balance of cash and cash equivalents as at the end of the period 301,284,723.52 136,328,721.71
162 SHANDONG CHENMING PAPER HOLDINGS LIMITED
7. Consolidated statement of changes in owners’ equity
Amount for the reporting period
Unit: RMB
2020
Equit att i utable t owners of t e Company
Other equit i struments Other comprehensiv General
I em Share capit l Preference Shares Perpetual Bonds Others Capit l reserves Less: t easury shares i come Specia reserves Surplu reserves ri k provis ons Reta ned profi Others Subto a Minorit i t rest Tota owners’ equit
I Balance as at t e end of t e pri r year 2,904,608,200.0 4,477,500,000.0 2,988,000,000.0 5,086,686,427.3 -879,452,135.1 1,212,009,109.9 74,122,644.2 9,306,269,617.3 25,169,743,863.7 1,170,029,016.8 26,339,772,880.5
XIII Financial Report
Plus: Changes i accounti g poli i s
Corr cti ns of pri r peri d err r
Business combinati n under common contr l
Others
I Balance as at t e beginnin of t e year 2,904,608,200.0 4,477,500,000.0 2,988,000,000.0 5,086,686,427.3 -879,452,135.1 1,212,009,109.9 74,122,644.2 9,306,269,617.3 25,169,743,863.7 1,170,029,016.8 26,339,772,880.5
I . Changes i t e peri d ( -” denote decrease) 79,600,000.0 -1,992,000,000.0 235,224,986.4 226,860,000.0 317,765,527.4 693,494,411.3 -892,775,074.7 353,265,909.4 -539,509,165.3
( Tota comprehensiv i come 317,765,527.4 1,712,029,078.5 2,029,794,605.9 194,184,215.9 2,223,978,821.9
( ) Capit l paid i and r duced by owners 79,600,000.0 -1,992,000,000.0 235,224,986.4 226,860,000.0 -1,904,035,013.5 646,180,728.2 -1,257,854,285.3
1. Ord nary share paid by owners 646,180,728.2 646,180,728.2
2. Capit l paid by holders of other equit
i str ments -1,992,000,000.0 -8,000,000.0 -2,000,000,000.0 -2,000,000,000.0
3. Amount of share-based payments
r cognised i owners equit 79,600,000.0 178,751,029.2 226,860,000.0 31,491,029.2 31,491,029.2
4. Others 64,473,957.2 64,473,957.2 64,473,957.2
( I Pro i dis r buti n -1,018,534,667.1 -1,018,534,667.1 -17,444,349.3 -1,035,979,016.4
1. Transfe t surp u r serves
2. Transfe t genera r s provis ons
3. Dis r buti n t owners ( r shareholders -1,018,534,667.1 -1,018,534,667.1 -17,444,349.3 -1,035,979,016.4
4. Others
( V Transfe wit i owners equit -469,654,685.4 -469,654,685.4
1. Capit l o share capit l create on capit l
r serv
2. Capit l o share capit l create on surp u
r serves
3. Off et l sses by surp u r serves
4. Defi ed benefi pla changes carr e
f rward t r t i ed earn ngs
5. Other comprehensiv i come carr e
f rward t r t i ed earn ngs
6. Others -469,654,685.4 -469,654,685.4
( ) Specia r serves
1. Wit drawal
2. Use
( I Others
I . Balance as at t e end of t e peri d 2,984,208,200.0 4,477,500,000.0 996,000,000.0 5,321,911,413.7 226,860,000.0 -561,686,607.6 1,212,009,109.9 74,122,644.2 9,999,764,028.7 24,276,968,789.0 1,523,294,926.2 25,800,263,715.2
2020 ANNUAL REPORT
163
164
Amount for the prior period
Unit: RMB
2019
Equit att i utable t owners of t e Company
Other equit i struments Other comprehensiv General
I em Share capit l Preference Shares Perpetual Bonds Others Capit l reserves Less: t easury shares i come Specia reserves Surplu reserves ri k provis ons Reta ned profi Others Subto a Minorit i t rest Tota owners’ equit
I Balance as at t e end of t e pri r year 2,904,608,200.0 4,477,500,000.0 2,988,000,000.0 5,091,449,915.1 -736,520,181.0 3,257,998.4 1,148,888,912.1 64,123,919.2 9,107,422,690.8 25,048,731,454.7 822,959,773.3 25,871,691,228.0
Plus: Changes i accounti g poli i s
Corr cti ns of pri r peri d err r
XIII Financial Report
Business combinati n under common contr l
Others
I Balance as at t e beginnin of t e year 2,904,608,200.0 4,477,500,000.0 2,988,000,000.0 5,091,449,915.1 -736,520,181.0 3,257,998.4 1,148,888,912.1 64,123,919.2 9,107,422,690.8 25,048,731,454.7 822,959,773.3 25,871,691,228.0
I . Changes i t e peri d ( -” denote decrease) -4,763,487.8 -142,931,954.0 -3,257,998.4 63,120,197.8 9,998,724.9 198,846,926.5 121,012,408.9 347,069,243.5 468,081,652.4
( Tota comprehensiv i come -142,931,954.0 1,656,566,584.8 1,513,634,630.7 71,201,958.4 1,584,836,589.2
( ) Capit l paid i and r duced by owners -4,763,487.8 -4,763,487.8 295,129,785.0 290,366,297.1
1. Ord nary share paid by owners 439,447,225.7 439,447,225.7
SHANDONG CHENMING PAPER HOLDINGS LIMITED
2. Capit l paid by holders of other equit
i str ments
3. Amount of share-based payments
r cognised i owners equit
4. Others -4,763,487.8 -4,763,487.8 -144,317,440.7 -149,080,928.6
( I Pro i dis r buti n 63,120,197.8 9,998,724.9 -1,457,719,658.3 -1,384,600,735.5 -19,262,500.0 -1,403,863,235.5
1. Transfe t surp u r serves 63,120,197.8 -63,120,197.8
2. Transfe t genera r s provis ons 9,998,724.9 -9,998,724.9
3. Dis r buti n t owners ( r shareholders -1,384,600,735.5 -1,384,600,735.5 -19,262,500.0 -1,403,863,235.5
4. Others
( V Transfe wit i owners equit -4,881,991.8 -4,881,991.8 -4,881,991.8
1. Capit l o share capit l create on capit l
r serv
2. Capit l o share capit l create on surp u
r serves
3. Off et l sses by surp u r serves
4. Defi ed benefi pla changes carr e
f rward t r t i ed earn ngs
5. Other comprehensiv i come carr e
f rward t r t i ed earn ngs
6. Others -4,881,991.8 -4,881,991.8 -4,881,991.8
( ) Specia r serves 1,623,993.3 1,623,993.3 1,623,993.3
1. Wit drawal 1,623,993.3 1,623,993.3 1,623,993.3
2. Use
( I Others
I . Balance as at t e end of t e peri d 2,904,608,200.0 4,477,500,000.0 2,988,000,000.0 5,086,686,427.3 -879,452,135.1 1,212,009,109.9 74,122,644.2 9,306,269,617.3 25,169,743,863.7 1,170,029,016.8 26,339,772,880.5
8. Statement of changes in equity of owners of the Company
Amount for the reporting period
Unit: RMB
2020
Other equity instruments Other comprehensive
Item Share capital Preference Shares Perpetual Bonds Others Capital reserves Less: treasury shares income Special reserves Surplus reserves Retained profit Others Total owners’ equity
I. Balance as at the end of the prior year 2,904,608,200.00 4,477,500,000.00 2,988,000,000.00 4,953,557,435.19 1,199,819,528.06 812,690,534.91 17,336,175,698.16
Plus: Changes in accounting policies
XIII Financial Report
Corrections of prior period errors
Others -567,200.64 -567,200.64
II. Balance as at the beginning of the year 2,904,608,200.00 4,477,500,000.00 2,988,000,000.00 4,953,557,435.19 1,199,819,528.06 812,123,334.27 17,335,608,497.52
III Changes in the period ( -” denotes decrease) 79,600,000.00 -1,992,000,000.00 170,751,029.23 226,860,000.00 -93,877,386.55 -2,062,386,357.32
(I) Total comprehensive income 924,657,280.61 924,657,280.61
(II) Capital paid in and reduced by owners 79,600,000.00 -1,992,000,000.00 170,751,029.23 226,860,000.00 -1,968,508,970.77
1. Ordinary shares paid by owners
2. Capital paid by holders of other equit
instruments -1,992,000,000.00 -8,000,000.00 -2,000,000,000.00
3. Amount of share-based payments
recognised in owners’ equit 79,600,000.00 178,751,029.23 226,860,000.00 31,491,029.23
4. Others
(III Profit distribution -1,018,534,667.16 -1,018,534,667.16
1. Transfer to surplus reserves
2. Distribution to owners (or shareholders) -1,018,534,667.16 -1,018,534,667.16
3. Others
(IV) Transfer within owners’ equit
1. Capital (or share capital) created on
capital reserve
2. Capital (or share capital) created on
surplus reserves
3. Offset losses by surplus reserves
4. Defined benefit plan changes carried
forward to retained earnings
5. Other comprehensive income carried
forward to retained earnings
6. Others
(V) Special reserves
1. Withdrawal
2. Use
(VI) Others
IV. Balance as at the end of the period 2,984,208,200.00 4,477,500,000.00 996,000,000.00 5,124,308,464.42 226,860,000.00 1,199,819,528.06 718,245,947.72 15,273,222,140.20
2020 ANNUAL REPORT
165
166
Amount for the prior period
Unit: RMB
2019
Other equity instruments Other comprehensive
Item Share capital Preference Shares Perpetual Bonds Others Capital reserves Less: treasury shares income Special reserves Surplus reserves Retained profit Others Total owners’ equity
I. Balance as at the end of the prior year 2,904,608,200.00 4,477,500,000.00 2,988,000,000.00 4,953,557,435.19 1,136,699,330.20 1,629,209,489.72 18,089,574,455.11
Plus: Changes in accounting policies
Corrections of prior period errors
XIII Financial Report
Others
II. Balance as at the beginning of the year 2,904,608,200.00 4,477,500,000.00 2,988,000,000.00 4,953,557,435.19 1,136,699,330.20 1,629,209,489.72 18,089,574,455.11
III Changes in the period ( -” denotes decrease) 63,120,197.86 -816,518,954.81 -753,398,756.95
(I) Total comprehensive income 631,201,978.57 631,201,978.57
(II) Capital paid in and reduced by owners
1. Ordinary shares paid by owners
2. Capital paid by holders of other equit
instruments
SHANDONG CHENMING PAPER HOLDINGS LIMITED
3. Amount of share-based payments
recognised in owners’ equit
4. Others
(III Profit distribution 63,120,197.86 -1,447,720,933.38 -1,384,600,735.52
1. Transfer to surplus reserves 63,120,197.86 -63,120,197.86
2. Distribution to owners (or shareholders) -1,384,600,735.52 -1,384,600,735.52
3. Others
(IV) Transfer within owners’ equit
1. Capital (or share capital) created on
capital reserve
2. Capital (or share capital) created on
surplus reserves
3. Offset losses by surplus reserves
4. Defined benefit plan changes carried
forward to retained earnings
5. Other comprehensive income carried
forward to retained earnings
6. Others
(V) Special reserves
1. Withdrawal
2. Use
(VI) Others
IV. Balance as at the end of the period 2,904,608,200.00 4,477,500,000.00 2,988,000,000.00 4,953,557,435.19 1,199,819,528.06 812,690,534.91 17,336,175,698.16
XIII Financial Report
III. General Information of the Company
1. Company overview
The predecessor of Shandong Chenming Paper Holdings Limited (hereinafter referred to as the “Company”) was
Shandong Shouguang Paper Mill Corporation, which was changed as a joint stock company with limited liability
through offering to specific investors in May 1993. In December 1996, with approval by Lu Gai Zi [1996] No. 270)
issued by the People’s Government of Shandong Province and Zheng Wei [1996] No. 59 of the Securities Committee
of the State Council, the Company was changed as a joint stock company with limited liability established by share
offer.
In May 1997, with approval by Zheng Wei Fa [1997] No. 26 issued by the Securities Committee of the State Council,
the Company issued 115,000,000 domestic listed foreign shares (B shares) under public offering, which were listed
and traded on Shenzhen Stock Exchange from 26 May 1997.
In September 2000, with approval by Zheng Jian Gong Si Zi [2000] No. 151 issued by the China Securities Regulatory
Commission, the Company issued an additional 70,000,000 RMB ordinary shares (A shares), which were listed and
traded on Shenzhen Stock Exchange from 20 November 2000.
In June 2008, with approval by the Stock Exchange of Hong Kong Limited, the Company issued 355,700,000 H
shares. At the same time, 35,570,000 H shares were allocated to the National Council for Social Security Fund by
our relevant state-owned shareholder and converted into overseas listed foreign shares (H shares) for the purpose of
reducing the number of state-owned shares. The additionally issued H shares were listed and traded on Hong Kong
Stock Exchange on 18 June 2008.
As at 31 December 2020, the total share capital of the Company was changed to 2,984,208,200 shares. For details,
please refer to Note VII. 38.
The Company has established a corporate governance structure comprising the general meeting, the board of
directors and the supervisory committee, and has human resources department, information technology department,
corporate management department, legal department, financial management department, capital management
department, securities investment department, procurement department, audit department, and other departments.
The Company and its subsidiaries (hereinafter referred to as the “Group”) are principally engaged in, among other
things, processing and sale of paper products (including machine-made paper and paper board), paper making
raw materials and machinery; generation and sale of electric power and thermal power; forestry, saplings growing,
processing and sale of timber; manufacturing, processing and sale of wood products; and manufacturing and sale of
laminated boards and fortified wooden floorboards, hotel service, and equipment financial and operating leasing, real
estate and property service.
The financial statements and notes thereto were approved at the eighth meeting of the ninth session of the board of
directors of the Group (the “Board”) on 25 March 2021.
2. Scope of consolidation
Subsidiaries of the Group included in the scope of consolidation in 2020 totalled 76. For details, please refer to
Note VII “Equity in other entities”. The scope of consolidation of the Group during the year had 10 more companies
included and three companies less compared to the prior year. For details, please refer to Note VIII “Changes in the
scope of consolidation”.
2020 ANNUAL REPORT 167
XIII Financial Report
IV. Basis of Preparation of the Financial Statements
1. Basis of preparation
These financial statements are prepared in accordance with the accounting standards for business enterprises, the
application guidelines thereof, interpretations and other related rules (hereinafter referred to as “ASBEs”) promulgated
by the Ministry of Finance. In addition, the Group also discloses relevant financial information in accordance with
the “Regulation on the Preparation of Information Disclosures of Companies Issuing Public Shares, No. 15: General
Requirements for Financial Reports” (revised in 2014) of the CSRC.
The financial statements are presented on a going concern.
The Group’s financial statements have been prepared on an accrual basis. Except for certain financial instruments and
inventories, the financial statements are prepared under the historical cost convention. In the event that depreciation
of assets occurs, a provision for impairment is made accordingly in accordance with the relevant regulations.
2. Going concern
No facts or circumstances comprise a material uncertainty about the Group’s going concern basis within 12 months
since the end of the reporting period.
V. Significant Accounting Policies and Accounting Estimates
Specific accounting policies and accounting estimates are indicated as follows:
The Company and its subsidiaries are principally engaged in machine-made paper, electricity and heat, construction
materials, paper making chemical products, financial leasing, hotel management and other operations. The Company and its
subsidiaries formulated certain specific accounting policies and accounting estimates for the transactions and matters such
as revenue recognition, determination of performance progress and R&D expenses based on their actual production and
operation characteristics pursuant to the requirements under the relevant accounting standards for business enterprises.
For details, please refer to this Note V. 27 “Revenue”. For the critical accounting judgments and estimates made by the
management, please refer to Note V. 34 “Change of Significant accounting policies and accounting estimates”.
1. Statement of compliance with the Accounting Standards for Business Enterprises
These financial statements have been prepared in conformity with the ASBEs, which truly and fully reflect the financial
position of the consolidated entity and the Group as at 31 December 2020 and relevant information such as the
operating results and cash flows of the consolidated entity and the Company for 2020.
2. Accounting period
The accounting period of the Group is from 1 January to 31 December of each calendar year.
168 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
3. Operating cycle
The operating cycle of the Group lasts for 12 months.
4. Functional currency
The functional currency of the Company and its domestic subsidiaries is Renminbi (“RMB”). Overseas subsidiaries
of the Company recognise U.S. dollar (“USD” or “US$”), Japanese yen (“JPY”), Euro (“EUR”) and South Korean
Won (“KRW”) as their respective functional currency according to the general economic environment in which these
subsidiaries operate. The Group prepares the financial statements in RMB.
5. Preparation of consolidated financial statements
(1) Scope of consolidation
The scope of consolidation of the consolidated financial statements is determined on the basis of control. The
term “control” refers to the fact that the Company has power over the investee and is entitled to variable returns
from its involvement with the investee and the ability to use its power over the investee to affect the amount of
those returns. A subsidiary is an entity controlled by the Company (including an enterprise, a separable part of
an investee, a structured entity, etc.).
(2) Basis for preparation of the consolidated financial statements
The consolidated financial statements are prepared by the Company based on the financial statements of the
Company and its subsidiaries and other relevant information. In preparing the consolidated financial statements,
the accounting policies and accounting periods of the Company and its subsidiaries shall be consistent, and
intra-company significant transactions and balances are eliminated.
A subsidiary and its business acquired through a business combination involving entities under common control
during the reporting period shall be included in the scope of the consolidation of the Company from the date
of being controlled by the ultimate controlling party, and its operating results and cash flows from the date of
being controlled by the ultimate controlling party are included in the consolidated income statement and the
consolidated cash flow statement, respectively.
For a subsidiary and its business acquired through a business combination involving entities not under common
control during the reporting period, its income, expenses and profits are included in the consolidated income
statement, and cash flows are included in the consolidated cash flow statement from the acquisition date to the
end of the reporting period.
The shareholders’ equity of the subsidiaries that is not attributable to the Company is presented under
shareholders’ equity in the consolidated balance sheet as minority interest. The portion of net profit or loss of
subsidiaries for the period attributable to minority interest is presented in the consolidated income statement
under the “profit or loss of minority interest”. When the amount of loss attributable to the minority shareholders
of a subsidiary exceeds the minority shareholders’ portion of the opening balance of owners’ equity of the
subsidiary, the excess amount shall be allocated against minority interest.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
5. Preparation of consolidated financial statements (Cont’d)
(3) Accounting treatment for loss of control over subsidiaries
For the loss of control over a subsidiary due to disposal of a portion of the equity investment or other reasons,
the remaining equity is measured at fair value on the date when the control is lost. The difference arising from
the sum of consideration received for disposal of equity interest and the fair value of remaining equity interest
over the sun of the share of the carrying amount of net assets of the former subsidiary calculated continuously
from the purchase date based on the shareholding percentage before disposal and the goodwill is recognised
as investment income in the period when the control is lost.
Other comprehensive income related to equity investment in the former subsidiary shall be transferred to current
profit or loss at the time when the control is lost, except for other comprehensive income arising from changes
in net assets or net liabilities due to remeasurement of defined benefit plan by the investee.
6. Classification of joint arrangements and accounting treatment for joint ventures
A joint arrangement refers to an arrangement of two or more parties have joint control. The joint arrangements of the
Group comprise joint operations and joint ventures.
(1) Joint operations
Joint operations refer to a joint arrangement during which the Group is entitled to relevant assets and
obligations of this arrangement.
The Group recognises the following items in relation to its interest in a joint operation and accounts for them in
accordance with the relevant ASBEs:
A. the assets held solely by it and assets held jointly according to its share;
B. the liabilities assumed solely by it and liabilities assumed jointly according to its share;
C. the revenue from sale of output from joint operations;
D. the revenue from sale of output from joint operations according to its share;
E. the fees solely incurred by it and fees incurred from joint operations according to its share.
(2) Joint ventures
Joint ventures refer to a joint arrangement during which the Company only is entitled to net assets of this
arrangement.
The Group accounts for its investments in joint ventures in accordance with the requirements relating to
accounting treatment using equity method for long-term equity investments.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
7. Standards for recognising cash and cash equivalents
Cash refers to cash on hand and deposits readily available for payment purpose. Cash equivalents refer to short-term
and highly liquid investments held by the Group which are readily convertible into known amount of cash and which
are subject to insignificant risk of value change.
8. Foreign currency operations and translation of statements denominated in foreign currency
(1) Foreign currency operations
The foreign currency operations of the Group are translated into the functional currency at the prevailing spot
exchange rate on the date of exchange, i.e. usually the middle price of RMB exchange rate published by the
People’s Bank of China on that date in general and the same hereinafter.
On the balance sheet date, foreign currency monetary items shall be translated at the spot exchange rate on
the balance sheet date. The exchange difference arising from the difference between the spot exchange rate
on the balance sheet date and the spot exchange rate upon initial recognition or the last balance sheet date will
be recognised in profit or loss for the period. The foreign currency non-monetary items measured at historical
cost shall still be measured by the functional currency translated at the spot exchange rate on the date of the
transaction. Foreign currency non-monetary items measured at fair value are translated at the spot exchange
rate on the date of determination of the fair value. The difference between the amounts of the functional
currency before and after the translation will be recognised in profit or loss for the period.
(2) Translation of financial statements denominated in foreign currency
When translating the financial statements denominated in foreign currency of overseas subsidiaries, assets and
liabilities on the balance sheet are translated at the spot exchange rate prevailing at the balance sheet date;
owner’s equity items except for “retained profit” are translated at the spot exchange rates at the dates on which
such items arose.
Income and expenses items in the income statement are translated at the average exchange rate for the period
in which the transaction occurred.
All items in the cash flow statements shall be translated at the average exchange rate for the period in which
the cash flow transaction occurred. Effects arising from changes of exchange rate on cash shall be presented
separately as the “effect of foreign exchange rate changes on cash and cash equivalents” item in the cash flow
statements.
The differences arising from translation of financial statements shall be included in the “other comprehensive
income” item in owners’ equity in the balance sheet.
On disposal of foreign operations and loss of control, exchange differences arising from the translation of
financial statements denominated in foreign currencies related to the disposed foreign operations which
has been included in owners’ equity in the balance sheet, shall be transferred to profit or loss in whole or in
proportionate share in the period in which the disposal took place.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
9. Financial instruments
A financial instrument is a contract that gives rise to a financial asset of one party and a financial liability or equity
instrument of another party.
(1) Recognition and derecognition of financial instruments
Financial asset or financial liability will be recognised when the Group became one of the parties under a
financial instrument contract.
Financial asset that satisfied any of the following criteria shall be derecognised:
the contract right to receive the cash flows of the financial asset has terminated;
the financial asset has been transferred and meets the derecognition criteria for the transfer of financial
asset as described below.
A financial liability (or a part thereof) is derecognised only when the present obligation is discharged in full or
in part. If an agreement is entered between the Group (debtor) and a creditor to replace the existing financial
liabilities with new financial liabilities, and the contractual terms of the new financial liabilities are substantially
different from those of the existing financial liabilities, the existing financial liabilities shall be derecognised and
the new financial liabilities shall be recognised.
Conventionally traded financial assets shall be recognised and derecognised at the trading date.
(2) Classification and measurement of financial assets
The Group classifies the financial assets according to the business model for managing the financial assets and
characteristics of the contractual cash flows as follows: financial assets measured at amortised cost, financial
assets measured at fair value through other comprehensive income, and financial assets measured at fair value
through profit or loss.
Financial assets measured at amortised cost
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated
as measured at fair value through other comprehensive income:
The Group’s business model for managing such financial assets is to collect contractual cash flows;
The contractual terms of the financial asset stipulate that cash flows generated on specific dates are solely
payments of principal and interest on the principal amount outstanding.
Subsequent to initial recognition, such financial assets are measured at amortised cost using the effective
interest method. A gain or loss on a financial asset that is measured at amortised cost and is not part of a
hedging relationship shall be recognised in profit or loss for the current period when the financial asset is
derecognised, amortised using the effective interest method or with impairment recognised.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
9. Financial instruments (Cont’d)
(2) Classification and measurement of financial assets (Cont’d)
Financial assets measured at fair value through other comprehensive income
A financial asset is classified as measured at fair value through other comprehensive income if it meets both of
the following conditions and is not designated as measured at fair value through profit or loss:
The Group’s business model for managing such financial assets is achieved both by collecting collect
contractual cash flows and selling such financial assets;
The contractual terms of the financial asset stipulate that cash flows generated on specific dates are solely
payments of principal and interest on the principal amount outstanding.
Subsequent to initial recognition, such financial assets are subsequently measured at fair value. Interest
calculated using the effective interest method, impairment losses or gains and foreign exchange gains and
losses are recognised in profit or loss for the current period, and other gains or losses are recognised in
other comprehensive income. On derecognition, the cumulative gain or loss previously recognised in other
comprehensive income is reclassified from other comprehensive income to profit or loss.
Financial assets measured at fair value through profit or loss
The Group classifies the financial assets other than those measured at amortised cost and measured at fair
value through other comprehensive income as financial assets measured at fair value through profit or loss.
Upon initial recognition, the Group irrevocably designates certain financial assets that are required to be
measured at amortised cost or at fair value through other comprehensive income as financial assets measured
at fair value through profit or loss in order to eliminate or significantly reduce accounting mismatch.
Upon initial recognition, such financial assets are measured at fair value. Except for those held for hedging
purposes, gains or losses (including interests and dividend income) arising from such financial assets are
recognised in the profit or loss for the current period.
The business model for managing financial assets refers to how the Group manages its financial assets in order
to generate cash flows. That is, the Group’s business model determines whether cash flows will result from
collecting contractual cash flows, selling financial assets or both. The Group determines the business model for
managing financial assets on the basis of objective facts and specific business objectives for managing financial
assets determined by key management personnel.
The Group assesses the characteristics of the contractual cash flows of financial assets to determine whether
the contractual cash flows generated by the relevant financial assets on a specific date are solely payments of
principal and interest on the principal amount outstanding. The principal refers to the fair value of the financial
assets at the initial recognition. Interest includes consideration for the time value of money, for the credit risk
associated with the principal amount outstanding during a particular period of time and for other basic lending
risks, costs and profits. In addition, the Group evaluates the contractual terms that may result in a change in the
time distribution or amount of contractual cash flows from a financial asset to determine whether it meets the
requirements of the above contractual cash flow characteristics.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
9. Financial instruments (Cont’d)
(2) Classification and measurement of financial assets (Cont’d)
Financial assets measured at fair value through profit or loss (Cont’d)
All affected financial assets are reclassified on the first day of the first reporting period following the change
in the business model where the Group changes its business model for managing financial assets; otherwise,
financial assets shall not be reclassified after initial recognition.
Financial assets are measured at fair value upon initial recognition. For financial assets measured at fair
value through profit or loss, relevant transaction costs are directly recognised in profit or loss for the current
period. For other categories of financial assets, relevant transaction costs are included in the amount initially
recognised. Accounts receivable arising from sales of goods or rendering services or without significant
financing component, are initially recognised based on the transaction price expected to be entitled by the
Group.
(3) Classification and measurement of financial liabilities
At initial recognition, financial liabilities of the Group are classified as financial liabilities measured at fair value
through profit or loss and financial liabilities measured at amortised cost. For financial liabilities not classified
as measured at fair value through profit or loss, relevant transaction costs are included in the amount initially
recognised.
Financial liabilities measured at fair value through profit or loss
Financial liabilities measured at fair value through profit or loss comprise financial liabilities held for trading
and financial liabilities designated as measured at fair value through profit or loss upon initial recognition. Such
financial liabilities are subsequently measured at fair value, and the gains or losses from the change in fair value
and the dividend or interest expenses related to the financial liabilities are included in the profit or loss of the
current period.
Financial liabilities measured at amortised cost
Other financial liabilities are subsequently measured at amortised cost using the effective interest rate method,
and the gains or losses arising from derecognition or amortisation are recognised in profit or loss for the current
period.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
9. Financial instruments (Cont’d)
(3) Classification and measurement of financial liabilities (Cont’d)
Classification between financial liabilities and equity instruments
A financial liability is a liability if:
it has a contractual obligation to pay in cash or other financial assets to other parties.
it has a contractual obligation to exchange financial assets or financial liabilities under potential adverse
condition with other parties.
it is a non-derivative instrument contract which will or may be settled with the entity’s own equity
instruments, and the entity will deliver a variable number of its own equity instruments according to such
contract.
it is a derivative instrument contract which will or may be settled with the entity’s own equity instruments,
except for a derivative instrument contract that exchanges a fixed amount of cash or other financial asset
with a fixed number of its own equity instruments.
Equity instruments are any contract that evidences a residual interest in the assets of an entity after deducting
all of its liabilities.
If the Group cannot unconditionally avoid the performance of a contractual obligation by paying cash or
delivering other financial assets, the contractual obligation meets the definition of financial liabilities.
Where a financial instrument must or may be settled with the Group’s own equity instruments, the Group’s own
equity instruments used to settle such instrument should be considered as to whether it is as a substitute for
cash or other financial assets or for the purpose of enabling the holder of the instrument to be entitled to the
remaining interest in the assets of the issuer after deducting all of its liabilities. For the former, it is a financial
liability of the Group; for the latter, it is the Group’s own equity instruments.
(4) Derivative financial instruments
The Group’s derivative financial instruments are mainly forward foreign exchange contracts, which are initially
recognised at fair value on the date a derivative contract is entered into and are subsequently measured at
their fair value. A derivative financial instrument is recognised as an asset when the fair value is positive and as
a liability when the fair value is negative. Any gain or loss arising from changes in fair value and not complying
with the accounting requirements on hedging shall be recognised in profit or loss for current period.
(5) Fair value of financial instruments
The methods for determining the fair value of the financial assets or financial liabilities are set out in Note V. 10.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
9. Financial instruments (Cont’d)
(6) Impairment of financial assets
The Group makes provision for impairment based on expected credit losses (ECLs) on the following items:
Financial assets measured at amortised cost;
Debt investments measured at fair value through other comprehensive income;
Measurement of ECLs
ECLs are the weighted average of credit losses of financial instruments weighted by the risk of default. Credit
losses refer to the difference between all contractual cash flows receivable according to the contract and
discounted according to the original effective interest rate and all cash flows expected to be received, i.e. the
present value of all cash shortages.
The Group takes into account reasonable and well-founded information such as past events, current conditions
and forecasts of future economic conditions, and calculates the probability-weighted amount of the present
value of the difference between the cash flows receivable from the contract and the cash flows expected to be
received weighted by the risk of default.
The Group measures ECLs of financial instruments at different stages. If the credit risk of the financial instrument
did not increase significantly upon initial recognition, it is at the first stage, and the Group makes provision for
impairment based on the ECLs within the next 12 months; if the credit risk of a financial instrument increased
significantly upon initial recognition but has not yet incurred credit impairment, it is at the second stage, and the
Group makes provision for impairment based on the lifetime ECLs of the instrument; if the financial instrument
incurred credit impairment upon initial recognition, it is at the third stage, and the Group makes provision for
impairment based on the lifetime ECLs of the instrument.
For financial instruments with low credit risk on the balance sheet date, the Group assumes that the credit risk
did not increase significantly upon initial recognition, and makes provision for impairment based on the ECLs
within the next 12 months.
Lifetime ECLs represent the ECLs resulting from all possible default events over the expected life of a financial
instrument. The 12-month ECLs are the ECLs resulting from possible default events on a financial instrument
within 12 months (or a shorter period if the expected life of the financial instrument is less than 12 months) after
the balance sheet date, and is a portion of lifetime ECLs.
The maximum period to be considered when estimating ECLs is the maximum contractual period over which
the Group is exposed to credit risk, including renewal options.
For the financial instruments at the first and second stages and with low credit risks, the Group calculates the
interest income based on the book balance and the effective interest rate before deducting the impairment
provisions. For financial instruments at the third stage, interest income is calculated based on the amortised
cost after deducting impairment provisions made from the book balance and the effective interest rate.
For bills receivable, accounts receivable and contract assets, regardless of whether there is a significant
financing component, the Group always makes provision for impairment at an amount equal to lifetime ECLs.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
9. Financial instruments (Cont’d)
(6) Impairment of financial assets (Cont’d)
Measurement of ECLs (Cont’d)
When the Group is unable to assess the information of ECLs for an individual financial asset at a reasonable
cost, it classifies bills receivable and accounts receivable into portfolios based on the credit risk characteristics,
and calculates the ECLs on a portfolio basis. The basis for determining the portfolios is as follows:
A. Bills receivable
Bills receivable portfolio 1: Bank acceptance bills
Bills receivable portfolio 2: Commercial acceptance bills
B. Accounts receivable
Accounts receivable portfolio 1: Factoring receivables
Accounts receivable portfolio 2: Receivables from non-related party customers
Accounts receivable portfolio 3: Due from related party customers
For bills receivable classified as a portfolio, the Group refers to the historical credit loss experience, combined
with the current situation and the forecast of future economic conditions, to calculate the ECLs based on default
risk exposure and lifetime ECL rate.
For accounts receivable classified as a portfolio, the Group refers to the historical credit loss experience,
combined with the current situation and the forecast of future economic conditions, to prepare a comparison
table of the ageing/overdue days of accounts receivable and the lifetime ECL rate to calculate the ECLs.
Other receivables
The Group classifies other receivables into portfolios based on credit risk characteristics, and calculates the
ECLs on a portfolio basis. The basis for determining the portfolios is as follows:
Other receivables portfolio 1: Amount due from government authorities
Other receivables portfolio 2: Amount due from related parties
Other receivables portfolio 3: Other receivables
For other receivables classified as a portfolio, the Group calculates the ECLs based on default risk exposure
and the ECL rate over the next 12 months or the entire lifetime.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
9. Financial instruments (Cont’d)
(6) Impairment of financial assets (Cont’d)
Long-term receivables
The Group’s long-term receivables include finance lease receivables and deposits receivable.
The Group classifies the finance lease receivables, deposits receivable and other receivables into portfolios
based on the credit risk characteristics, and calculates the ECLs on a portfolio basis. The basis for determining
the portfolios is as follows:
A. Finance lease receivables
Finance lease receivables portfolio 1: Receivables not past due
Finance lease receivables portfolio 2: Overdue receivables
B. Other long-term receivables
Other long-term receivables portfolio 1: Deposits receivable
Other long-term receivables portfolio 2: Other receivables
For deposits receivable and other receivables, the Group refers to the historical credit loss experience,
combined with the current situation and the forecast of future economic conditions, and calculates the ECLs
based on default risk exposure and lifetime ECL rate.
Except for those of finance lease receivables and deposits receivable, the ECLs of other receivables and
long-term receivables classified as a portfolio are measured based on default risk exposure and ECL rate over
the next 12 months or the entire lifetime.
Debt investments and other debt investments
For debt investments and other debt investments, the Group measures the ECLs based on the nature of the
investment, the types of counterparty and risk exposure, and default risk exposure and ECL rate within the next
12 months or the entire lifetime.
Assessment of significant increase in credit risk
In assessing whether the credit risk of a financial instrument has increased significantly upon initial recognition,
the Group compares the risk of default of the financial instrument at the balance sheet date with that at the date
of initial recognition to determine the relative change in risk of default within the expected lifetime of the financial
instrument.
In determining whether the credit risk has increased significantly upon initial recognition, the Group considers
reasonable and well-founded information, including forward-looking information, which can be obtained without
unnecessary extra costs or efforts. Information considered by the Group includes:
The debtor’s failure to make payments of principal and interest on their contractually due dates;
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
9. Financial instruments (Cont’d)
(6) Impairment of financial assets (Cont’d)
Assessment of significant increase in credit risk (Cont’d)
An actual or expected significant deterioration in a financial instrument’s external or internal credit rating (if any);
An actual or expected significant deterioration in the operating results of the debtor;
Existing or expected changes in the technological, market, economic or legal environment that have a significant
adverse effect on the debtor’s ability to meet its obligation to the Group.
Depending on the nature of the financial instruments, the Group assesses whether there has been a significant
increase in credit risk on either an individual basis or a collective basis. When the assessment is performed on a
collective basis, the financial instruments are grouped based on their common credit risk characteristics, such
as past due information and credit risk ratings.
The Group determines that the credit risk on a financial asset has increased significantly if it is more than 30
days past due.
Credit-impaired financial assets
At balance sheet date, the Group assesses whether financial assets measured at amortised cost and debt
investments measured at fair value through other comprehensive income are credit-impaired. A financial asset
is credit-impaired when one or more events that have an adverse effect on the estimated future cash flows
of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following
observable events:
Significant financial difficulty of the issuer or debtor;
A breach of contract by the debtor, such as a default or delinquency in interest or principal payments;
For economic or contractual reasons relating to the debtor’s financial difficulty, the Group having granted to the
debtor a concession that would not otherwise consider;
It becoming probable that the debtor will enter bankruptcy or other financial reorganisation;
The disappearance of an active market for that financial asset because of financial difficulties of the issuer or
debtor.
Presentation of provisions for ECLs
ECLs are remeasured at each balance sheet date to reflect changes in the financial instrument’s credit risk upon
initial recognition. Any change in the ECL amount is recognised as an impairment gain or loss in profit or loss for
the current period. For financial assets measured at amortised cost, the provisions of impairment is deducted
from the carrying amount of the financial assets presented in the balance sheet; for debt investments at fair
value through other comprehensive income, the Group makes provisions of impairment in other comprehensive
income without reducing the carrying amount of the financial asset.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
9. Financial instruments (Cont’d)
(6) Impairment of financial assets (Cont’d)
Write-offs
The book balance of a financial asset is directly written off to the extent that there is no realistic prospect of
recovery of the contractual cash flows of the financial asset (either partially or in full). Such write-off constitutes
derecognition of such financial asset. This is generally the case when the Group determines that the debtor
does not have assets or sources of income that could generate sufficient cash flows to repay the amounts
subject to the write-off. However, financial assets that are written off could still be subject to enforcement
activities in order to comply with the Group’s procedures for recovery of amounts due.
If a write-off of financial assets is later recovered, the recovery is credited to profit or loss in the period in which
the recovery occurs.
(7) Transfer of financial assets
Transfer of financial assets refers to the transfer or delivery of financial assets to another party other than the
issuer of such financial assets (the transferee).
If the Group transfers substantially all the risks and rewards of ownership of the financial asset to the transferee,
the financial asset shall be derecognised. If the Group retains substantially all the risks and rewards of
ownership of a financial asset, the financial asset shall not be derecognised.
If the Group neither transfers nor retains substantially all the risks and rewards of ownership of the financial
asset, it accounts for the transaction as follows: if the Group does not retain control, it derecognises the
financial asset and recognises any resulting assets or liabilities; if the control over the financial asset is not
waived, the relevant financial asset is recognised according to the extent of its continuing involvement in the
transferred financial asset and the relevant liability is recognised accordingly.
(8) Offset of financial assets and financial liabilities
If the Group owns the legitimate rights of offsetting the recognised financial assets and financial liabilities, which
are enforceable currently, and the Group plans to realise the financial assets or to clear off the financial liabilities
on a net amount basis or simultaneously, the net amount of financial assets and financial liabilities shall be
presented in the balance sheet upon offsetting. Otherwise, financial assets and financial liabilities are presented
separately in the balance sheet without offsetting.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
10. Fair value measurement
The fair value refers to the price that will be received when selling an asset or the price to be paid to transfer a liability
in an orderly transaction between market participants on the date of measurement.
The Group measures the relevant assets or liabilities at fair value, assuming that the orderly transaction of selling the
assets or transferring the liabilities is conducted in the main market of the relevant assets or liabilities; in the absence
of the main market, the Group assumes that the transaction is conducted in the most advantageous market for
the relevant asset or liability. The main (or the most advantageous) market must be accessible to by the Group on
the measurement date. The Group uses assumptions that market participants would use when pricing the asset or
liability, assuming that market participants act in their economic best interest.
For financial assets or financial liabilities exist in an active market, fair value is determined based on the quoted
price in such market. While financial instruments do not exist in an active market, the fair value is determined using
valuation techniques.
Fair value measurement for a non-financial asset takes into account a market participant’s ability to generate
economic benefits by using the asset in its best use or by selling it to another market participant that would use the
asset in its best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are
available to measure fair value, and gives priority to relevant observable inputs. Unobservable inputs are used only
when relevant observable inputs are not accessible or the access to which is impracticable.
All assets and liabilities measured at fair value or disclosed in the financial statements are categorised within the fair
value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement
as a whole: Level 1 inputs are available quoted prices (unadjusted) in active markets for identical assets or liabilities
at the measurement date; Level 2 inputs are inputs, other than Level 1 inputs, that are observable for the asset or
liability, either directly or indirectly; Level 3 inputs are unobservable inputs for the asset or liability.
For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Group
re-assess them at each balance sheet date to determine whether transfers have occurred between levels in the
hierarchy.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
11. Inventories
(1) Classification of inventories
Inventories of the Group mainly include raw materials, work in progress, goods in stock, development products
and consumable biological assets, etc.
(2) Pricing of inventories dispatched
Inventories of the Group are measured at their actual cost when obtained. Cost of raw materials, goods in stock
and others will be calculated with weighted average method when being dispatched.
Consumable biological assets refer to biological assets held-for-sale which include growing timber. Consumable
biological assets without a stock are stated at historical cost at initial recognition, and subsequently measured
at fair value when there is a stock. Changes in fair values shall be recognised as profit or loss in the current
period. The cost of self-planting, self-cultivating consumable biological assets is the necessary expenses
directly attributable to such assets prior to canopy closure, including borrowing costs eligible for capitalisation.
Subsequent expenses such as maintenance cost incurred after canopy closure shall be included in profit or loss
for the current period.
The cost of consumable biological assets shall, at the time of harvest or disposal, be carried forward at carrying
amount using the stock volume proportion method.
(3) Recognition of net realisable value of inventories and provision for inventory impairment
Net realisable value of inventories refers to the amount of the estimated price of inventories less the estimated
cost incurred upon completion, estimated sales expenses and taxes and levies. The realisable value of
inventories shall be determined on the basis of definite evidence, purpose of holding the inventories and effect
of after-balance-sheet-date events.
At the balance sheet date, provision for inventory impairment is made when the cost is higher than the
net realisable value. The Group usually makes provision for inventory impairment based on categories of
inventories. At the balance sheet date, in case the factors causing inventory impairment no longer exists, the
original provision for inventory impairment shall be reversed.
(4) Inventory stock taking system
The Group implements permanent inventory system as its inventory stock taking system.
(5) Amortisation of low-value consumables and packaging materials
The low-value consumables of the Group are amortised when issued for use.
Packaging materials for turnover are amortised when issued for use.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
12. Held for sale and discontinued operations
(1) Classification and measurement of non-current assets or disposal groups held for sale
A non-current asset or disposal group is classified as held for sale if its carrying amount will be recovered
principally through a sale transaction (including a non-monetary asset exchange with commercial substance)
rather than through continuing use.
The aforesaid non-current asset does not include the investment property subsequently measured at fair value,
the biological assets measured at the net amount of the fair value deducting the sales expense, the assets
generated from remuneration, financial assets, deferred income tax assets and rights from insurance contract.
A disposal group is a group of assets to be disposed of together as a whole by sale or other means in a
transaction, and liabilities directly associated with those assets that will be transferred in the transaction. In
certain circumstances, the disposal group includes the goodwill acquired in the business combination.
A non-current asset or a disposal group is classified as held for sale if it meets all of the following conditions:
the non-current asset or disposal group is available for immediate sale in its present condition subject only to
terms that are usual and customary for sales of such asset or disposal group; the sale is highly probable, i.e. a
sale plan has been resolved and a firm purchase commitment has been obtained, and the sale is expected to
be completed within one year. When the Group loses control of a subsidiary due to reasons such as disposal
of investment in a subsidiary, regardless of whether the Group retains part of the equity investment after the
disposal, when the investment in a subsidiary intended to be disposed of meets the conditions for classification
as held for sale, the investment in a subsidiary is classified as held for sale as a whole in the separate financial
statements, and all assets and liabilities of the subsidiary are classified as held for sale in the consolidated
financial statements.
When the non-current assets or disposal groups held for sale are initially measured or remeasured at the
balance sheet date, the excess of the carrying amount over the net amount of the fair value less selling
expenses is recognised as asset impairment loss. For the amount of impairment loss recognised on disposal
groups held for sale, the carrying amount of the goodwill of the disposal group shall be offset against first, and
then be offset against the carrying amount of non-current assets according to the proportion of the carrying
amount of non-current assets.
If the net amount of the fair value of the non-current assets or disposal groups held for sale less the selling
expenses increases on the subsequent balance sheet date, the amount previously written down shall be
recovered and reversed in the amount of asset impairment loss recognised after be classified as held for sale,
and the reversed amount shall be included in the current profit and loss. The carrying amount of goodwill written
off shall not be reversed.
Non-current assets held for sale and assets in disposal group held for sale are not depreciated or amortised.
Interest and other expenses of a disposal group classified as held for sale continue to be recognised. For all
or part of an investment in an associate or a joint venture that is classified as held for sale, the part of being
classified as held for sale shall cease to be accounted for using the equity method, while any retained portion
(not classified as held for sale) shall continue to be accounted for using the equity method; The Group ceases to
use the equity method from the date when the Group ceases to have significant influence over an associate or a
joint venture.
If a non-current asset or disposal group is classified as held for sale but subsequently no longer meets the
criteria for being classified as held for sale, the Group shall cease to classify it as held for sale and measure it at
the lower of:
he carrying amount of the asset or disposal group before being classified as held for sale is adjusted by
the depreciation, amortisation or impairment that would have been recognised if the asset or disposal
group had not been classified as held for sale;
recoverable amount.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
12. Held for sale and discontinued operations (Cont’d)
(2) Discontinued operations
A discontinued operation is a component of the Group that either has been disposed of or is classified as held
for sale, and can be distinguished separately, and meets one of the following conditions:
The component represents a separate major line of business or geographical area of operations.
The component is part of a related plan to dispose of a separate major line of business or geographical
area of operations.
The component is a subsidiary acquired exclusively with a view to resale.
(3) Presentation
The Group presents the non-current assets held for sale or the assets in the disposal group held for sale as
“assets held-for-sale” and the liabilities in the disposal group held for sale as “liabilities held-for-sale” in the
balance sheet.
The Group presents profit or loss from continuing operations and profit or loss from discontinued operations in
the income statement. For non-current assets and disposal groups held for sale that do not meet the definition
of discontinued operation, their impairment losses and reversal amounts and gains or losses are presented as
profit or loss from continuing operations. Operating profit or loss such as impairment loss and reversal amount
of discontinued operation and disposal gain or loss are presented as profit or loss from discontinued operation.
Disposal groups that are intended to be closed for use rather than for sale and meet the conditions for the
components in the definition of discontinued operations are presented as discontinued operations from the date
of cessation of use.
For the discontinued operations presented in the current period, the information originally presented as
profit or loss from continuing operations in the current financial statements is re-presented as profit or loss
from discontinued operations in the comparable accounting period. If the discontinued operations no longer
meet the conditions for being classified of held-for-sale, the information originally presented as profit or loss
from discontinued operations in the current financial statements shall be re-presented as profit or loss from
continuing operations in the comparable accounting period.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
13. Long-term equity investments
Long-term equity investments include the equity investments in subsidiaries, joint ventures and associates. Associates
of the Group are those investees that the Group imposes significant influence over.
(1) Determination of initial investment cost
Long-term equity investments acquired through business combinations: for a long-term equity investment
acquired through a business combination involving enterprises under common control, the investment cost shall
be the absorbing party’s share of the carrying amount of the owners’ equity under the consolidated financial
statements of the ultimate controlling party on the date of combination. For a long-term equity investment
acquired through a business combination involving enterprises not under common control, the investment cost
of the long-term equity investment shall be the cost of combination.
Long-term equity investments acquired through other means: for a long-term equity investment acquired
by cash payment, the initial investment cost shall be the purchase cost actually paid; for a long-term equity
investment acquired by issuing equity securities, the initial investment cost shall be the fair value of equity
securities issued.
(2) Subsequent measurement and method for profit or loss recognition
Investments in subsidiaries shall be accounted for using the cost method. Except for the investments which
meet the conditions of holding for sale, investments in associates and joint ventures shall be accounted for
using the equity method.
For a long-term equity investment accounted for using the cost method, the cash dividends or profits declared
by the investees for distribution shall be recognised as investment gains and included in profit or loss for the
current period, except the case of receiving the actual consideration paid for the investment or the declared but
not yet distributed cash dividends or profits which is included in the consideration.
For a long-term equity investment accounted for using the equity method, where the initial investment cost
exceeds the investor’s interest in the fair value of the investee’s identifiable net assets at the acquisition date,
no adjustment shall be made to the investment cost of the long-term equity investment. Where the initial
investment cost is less than the investor’s interest in the fair value of the investee’s identifiable net assets at the
acquisition date, adjustment shall be made to the carrying amount of the long-term equity investment, and the
difference shall be charged to profit or loss for the current period.
Under the equity method, investment gain and other comprehensive income shall be recognised based on
the Company’s share of the net profits or losses and other comprehensive income made by the investee,
respectively. Meanwhile, the carrying amount of long-term equity investment shall be adjusted. The carrying
amount of long-term equity investment shall be reduced based on the Group’s share of profit or cash dividend
distributed by the investee. In respect of the other movement of net profit or loss, other comprehensive income
and profit distribution of investee, the carrying amount of long-term equity investment shall be adjusted and
included in the capital reserves (other capital reserves). The Group shall recognise its share of the investee’s net
profits or losses based on the fair values of the investee’s individual separately identifiable assets at the time of
acquisition, after making appropriate adjustments thereto according to the accounting policies and accounting
periods of the Group.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
13. Long-term equity investments (Cont’d)
(2) Subsequent measurement and method for profit or loss recognition (Cont’d)
For additional equity investment made in order to obtain significant influence or common control over investee
without resulted in control, the initial investment cost under the equity method shall be the aggregate of fair
value of previously held equity investment and additional investment cost on the date of transfer. The difference
between the fair value and carrying amount of previously held equity investment on the date of transfer and the
accumulated change in fair value originally included in other comprehensive income shall be recognised in the
profit or loss for the current period under the equity method.
In the event of loss of common control or significant influence over investee due to partial disposal of equity
investment, the remaining equity interest after disposal shall be accounted for according to the Accounting
Standard for Business Enterprises No. 22 – Recognition and measurement of Financial Instruments. The
difference between its fair value and carrying amount shall be included in profit or loss for the current period. In
respect of other comprehensive income recognised under previous equity investment using equity method, it
shall be accounted for in accordance with the same accounting treatment for direct disposal of relevant asset or
liability by investee at the time when equity method was ceased to be used. Movement of other owners’ equity
related to the previous equity investment shall be transferred to profit or loss for the current period.
In the event of loss of control over investee due to partial disposal of equity investment, the remaining equity
interest which can apply common control or impose significant influence over the investee after disposal shall
be accounted for using equity method. Such remaining equity interest shall be treated as accounting for using
equity method since it is obtained and adjustment was made accordingly. For the remaining equity interest
which cannot apply common control or impose significant influence over the investee after disposal, it shall be
accounted for using the Accounting Standard for Business Enterprises No. 22 – Recognition and measurement
of Financial Instruments. The difference between its fair value and carrying amount as at the date of losing
control shall be included in profit or loss for the current period.
If the shareholding ratio of the Group is reduced due to the capital increase of other investors, and as a result,
the Company loses the control of but still can apply common control or impose significant influence over the
investee, the net asset increase due to the capital increase of the investee attributable to the Company shall
be recognised according to the new shareholding ratio, and the difference with the original carrying amount of
the long-term equity investment corresponding to the shareholding ratio reduction part that should be carried
forward shall be recorded in the profit or loss for the current period; and then it shall be adjusted according to
the new shareholding ratio as if equity method is used for accounting when acquiring the investment.
In respect of the transactions between the Group and its associates and joint ventures, the share of unrealised
gain or loss arising from internal transactions shall be eliminated by the portion attributable to the Group.
Investment gain shall be recognised accordingly. However, any unrealised loss arising from internal transactions
between the Group and an investee is not eliminated to the extent that the loss is impairment loss of the
transferred assets.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
13. Long-term equity investments (Cont’d)
(3) Basis for determining the common control and significant influence on the investee
Common control is the contractually agreed sharing of control over an arrangement, which relevant activities
of such arrangement must be decided by unanimously agreement from parties who share control. When
determining if there is any common control, it should first be identified if the arrangement is controlled by
all the participants or the group consisting of the participants, and then determined if the decision on the
arranged activity can be made only with the unanimous consent of the participants sharing the control. If all the
participants or a group of participants can only decide the relevant activities of certain arrangement through
concerted action, it can be considered that all the participants or a group of participants share common
control on the arrangement. If there are two or more participant groups that can collectively control certain
arrangement, it does not constitute common control. When determining if there is any common control, the
relevant protection rights will not be taken into account.
Significant influence is the power of the investor to participate in the financial and operating policy decisions
of an investee, but to fail to control or joint control the formulation of such policies together with other parties.
When determining if there is any significant influence on the investee, the influence of the voting shares of the
investee held by the investor directly and indirectly and the potential voting rights held by the investor and
other parties which are exercisable in the current period and converted to the equity of the investee, including
the warrants, stock options and convertible bonds that are issued by the investee and can be converted in the
current period, shall be taken into account.
When the Group holds directly or indirectly through the subsidiary 20% (inclusive) to 50% of the voting shares
of the investee, it is generally considered to have significant influence on the investee, unless there is concrete
evidence to prove that it cannot participate in the production and operation decision-making of the investee
and cannot pose significant influence in this situation. When the Group owns less than 20% of the voting shares
of the investee, it is generally considered that it has not significantly influenced on the investee, unless there
is concrete evidence to prove that it can participate in the production and operation decision-making of the
investee and cannot pose significant influence in this situation.
(4) Method for impairment test and measurement of impairment provision
For the method for making impairment provision for the investment in subsidiaries, associates and joint
ventures, please refer to Note V. 21.
14. Investment property
Measurement of investment property
Measurement using the cost method
Depreciation or amortisation method
Investment property refers to real estate held to earn rentals or for capital appreciation, or both. The investment
property of the Group includes leased land use rights, land use rights held for sale after appreciation, and leased
buildings.
The investment property of the Group is measured initially at cost upon acquisition, and subject to depreciation or
amortisation in the relevant periods according to the relevant provisions on fixed assets or intangible assets.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
14. Investment property (Cont’d)
For the method for making impairment provision for the investment property adopted cost method for subsequent
measurement, please refer to Note V. 20.
When an investment property is sold, transferred, retired or damaged, the amount of proceeds on disposal of the
property net of the carrying amount and related tax and surcharges is recognised in profit or loss for the current
period.
15. Fixed assets
(1) Conditions for recognition
Fixed assets of the Group are tangible assets that are held for use in the production or supply of goods or
services, for rental to others, or for administrative purposes; and have a useful life of more than one accounting
year. Fixed assets are recognised only if the Company is very likely to receive economic benefits from the asset
and its cost can be measured reliably. A fixed asset of the Group shall be initially measured at actual cost when
acquired.
(2) Depreciation method
Useful lives of Estimated Annual
Depreciation depreciation residual value depreciation
Category method (Year) (%) rate (%)
Housing and building structure Straight-line method 20-40 5-10 2.25-4.75
Machinery and equipment Straight-line method 8-20 5-10 4.50-11.88
Transportation equipment Straight-line method 5-8 5-10 11.25-19.00
Electronic equipment and others Straight-line method 5 5-10 18.00-19.00
The Group adopts the straight-line method for depreciation. Provision for depreciation will be started when the
fixed asset reaches its expected usable state, and stopped when the fixed asset is derecognised or classified
as a non-current asset held for sale. Without regard to the depreciation provision, the Group determines the
depreciation rate by category, estimated useful lives and estimated residual value of the fixed assets. Where, for
the fixed assets for which depreciation provision is made, to determine the depreciation rate, the accumulated
amount of the fixed asset depreciation provision that has been made shall be deducted.
(3) The impairment test method and impairment provision method of the fixed assets are set out in Note V. 21.
(4) The Group will recheck the useful lives, estimated net residual value and depreciation method of the fixed
assets at the end of each year.
When there is any difference between the useful lives estimate and the originally estimated value, the useful
lives of the fixed asset shall be adjusted. When there is any difference between the estimated net residual value
estimate and the originally estimated value, the estimated net residual value of the fixed asset shall be adjusted.
(5) Overhaul expense
For the overhaul expense incurred by the Group during the regular inspection on the fixed assets, if there is
concrete evidence to prove that it meets the fixed asset recognition condition, it shall be included in the cost of
fixed asset; if it does not meet the fixed asset recognition condition, it shall be included in the profit or loss for
the current period. The depreciation of fixed assets shall be continued in the intervals of the regular overhaul of
the fixed asset.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
16. Construction in progress
Construction in progress of the Group is recognised based on the actual construction cost, including all necessary
expenditures incurred for construction projects, capitalised borrowing costs for the construction in progress before it
has reached the working condition for its intended use, and other related expenses during the construction period.
A construction in progress is reclassified to fixed assets when it has reached the working condition for its intended
use.
The method for impairment provision of construction in progress is set out in Note V. 21.
17. Materials for project
The materials for project of the Group refer to various materials prepared for construction in progress, including
construction materials, equipment not yet installed and tools for production.
The purchased materials for project are measured at cost, and the planning materials for project are transferred to
construction in progress. After the completion of the project, the remaining materials for project are transferred to
inventory.
The method for impairment provision of materials for project is set out in Note V. 21.
The closing balance of materials for project is presented as “construction in progress” item in the balance sheet.
18. Borrowing costs
(1) Recognition principle for the capitalisation of the borrowing costs
The borrowing costs incurred by the Group directly attributable to the acquisition, construction or production
of a qualifying asset will be capitalised and included in the cost of relevant asset. Other borrowing costs will be
recognised as expenses when incurred according to the incurred amount, and included in the profit or loss for
the current period. When the borrowing costs meet all the following conditions, capitalisation shall be started:
The capital expenditure has been incurred, which includes the expenditure incurred by paying cash,
transferring non-cash assets or undertaking interest-bearing liabilities for acquiring, constructing or
producing the qualifying assets;
The borrowing costs have been incurred;
The acquisition, construction or production activity necessary for the asset to be ready for its intended
use or sale has been started.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
18. Borrowing costs (Cont’d)
(2) Capitalisation period of borrowing costs
When a qualifying asset acquired, constructed or produced by the Group is ready for its intended use or sale,
the capitalisation of the borrowing costs shall discontinue. The borrowing costs incurred after a qualifying asset
is ready for its intended use or sale shall be recognised as expenses when incurred according to the incurred
amount, and included in the profit or loss for the current period.
Capitalisation of borrowing costs shall be suspended during periods in which the acquisition, construction or
production of a qualifying asset is interrupted abnormally, when the interruption is for a continuous period of
more than 3 months. The capitalisation of the borrowing costs shall be continued in the normal interruption
period.
(3) Calculation methods for capitalisation rate and capitalisation amount of the borrowing costs
Where funds are borrowed for a specific purpose, the amount of interest to be capitalised shall be the actual
interest expense incurred on that borrowing for the period less any bank interest earned from depositing the
borrowed funds before being used into banks or any investment income on the temporary investment of those
funds. Where funds are borrowed for general purpose, the Company shall determine the amount of interest
to be capitalised on such borrowings by applying a capitalisation rate to the weighted average of the excess
amounts of cumulative expenditures on the asset over and above the amounts of specific-purpose borrowings.
The capitalisation rate shall be the weighted average of the interest rates applicable to the general-purpose
borrowings.
During the capitalisation period, exchange differences on a specific purpose borrowing denominated in foreign
currency shall be capitalised. Exchange differences related to general-purpose borrowings denominated in
foreign currency shall be included in profit or loss for the current period.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
19. Intangible assets
(1) Measurement method, useful life and impairment testing
The intangible assets of the Group include land use rights, software and certificates of third party right.
The intangible asset is initially measured at cost, and its useful life is determined upon acquisition. If the useful
life is finite, the intangible asset will be amortised over the estimated useful life using the amortisation method
that can reflect the estimated realisation of the economic benefits related to the asset, starting from the time
when it is available for use. If it is unable to reliably determine the estimated realisation, straight-line method
shall be adopted for amortisation. The intangible assets with uncertain useful life will not be amortised.
The amortisation methods for the intangible assets with finite useful life are as follows:
Type Useful life (year) Method of amortisation Remark
Land use rights 50-70 Straight-line method
Software 5-10 Straight-line method
Certificates of third party right 3 Straight-line method
The Group reviews the useful life and amortisation method of the intangible assets with finite useful life at the
end of each year. If it is different from the previous estimates, the original estimates will be adjusted, and will be
treated as a change in accounting estimate.
If it is estimated on the balance sheet date that certain intangible asset can no longer bring future economic
benefit to the company, the carrying amount of the intangible asset will be entirely transferred into the profit or
loss for the current period.
The impairment method for the intangible assets is set out in Note V. 21.
20. Research and development expenditure
Research and development expenditure of the Group is divided into expenses incurred during the research phase and
expenses incurred during the development phase.
Expenses incurred during the research phase and the development phase are recognised in profit or loss in the
current period.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
21. Asset impairment
Impairment of long-term equity investments in subsidiaries, associates and joint ventures, investment property, fixed
assets, construction in progress, materials for project, right-of-use assets, intangible assets, goodwill and others
(excluding inventories, deferred tax assets and financial assets) subsequently measured at cost is determined as
follows:
The Group determines if there is any indication of asset impairment as at the balance sheet date. If there is any
evidence indicating that an asset may be impaired, recoverable amount shall be estimated for impairment test.
Goodwill arising from business combinations, intangible assets with an indefinite useful life and intangible assets not
ready for use will be tested for impairment annually, regardless of whether there is any indication of impairment.
The recoverable amount of an asset is the higher of its fair value less costs of disposal and the present value of the
future cash flows expected to be derived from the asset. The Group estimates the recoverable amount of an individual
asset. If it is not possible to estimate the recoverable amount of the individual asset, the Group shall determine the
recoverable amount of the asset group to which the asset belongs. The determination of an asset group is based on
whether major cash inflows generated by the asset group are independent of the cash inflows from other assets or
asset groups.
When the recoverable amount of an asset or an asset group is less than its carrying amount, the carrying amount is
reduced to its recoverable amount. The reduction amount is charged to profit or loss and an impairment provision is
made accordingly.
For the purpose of impairment test of goodwill, the carrying amount of goodwill acquired in a business combination is
allocated to the relevant asset groups on a reasonable basis from the acquisition date; where it is difficult to allocate
to the related asset groups, it is allocated to the combination of related asset groups. The related asset groups or
combination of asset groups are those which can benefit from the synergies of the business combination and are not
larger than the reportable segments identified by the Group.
In the impairment test, if there is any indication that an asset group or a combination of asset groups related to
goodwill may be impaired, the Group first tests the asset group or set of asset groups excluding goodwill for
impairment, calculates the recoverable amount and recognises the corresponding impairment loss. An impairment test
is then carried out on the asset group or combination of asset groups containing goodwill by comparing its carrying
amount with its recoverable amount. If the recoverable amount is lower than the carrying amount, an impairment loss
is recognised for goodwill.
An impairment loss recognised shall not be reversed in a subsequent period.
22. Long-term prepaid expenses
The long-term prepaid expenses incurred by the Group shall be recognised based on the actual cost, and evenly
amortised over the estimated benefit period. For the long-term prepaid expense that cannot benefit the subsequent
accounting periods, its value after amortisation shall be entirely included in the profit or loss for the current period.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
23. Employee benefits
(1) Scope of employee benefits
Employee benefits are all forms of considerations or compensation given by an entity in exchange for
services rendered by employees or for the termination of employment. Employee benefits include short-term
staff remuneration, post-employment benefits, termination benefits and other long-term employee benefits.
Employee benefits include benefits provided to employees’ spouses, children, other dependants, survivors of
the deceased employees or to other beneficiaries.
Employee benefits are presented as “employee benefits payable” and “long-term employee benefits payable” in
the balance sheet, respectively, according to liquidity.
(2) Short-term staff remuneration
Employee wages or salaries actually incurred, bonuses, and social insurance contributions such as medical
insurance, work injury insurance, maternity insurance, and housing fund, contributed at the applicable
benchmarks and rates, are recognised as a liability as the employees provide services, with a corresponding
charge to profit or loss or included in the cost of assets where appropriate. Where the payment of liability is
expected not to be fully settled within 12 months after the end of the annual reporting period in which the
employees render the related services, and the financial impact would be material, these liabilities are measured
at their discounted values.
(3) Post-employment benefits
Post-employment benefit plans include defined contribution plans and defined benefit plans. A defined
contribution plan is a post-employment benefit plan under which the Group pays fixed contributions
into a separate fund and the Group has no further obligations for payment. A defined benefit plan is a
post-employment benefit plan other than a defined contribution plan.
Defined contribution plans
Defined contribution plans include basic pension insurance and unemployment insurance, both of which are
operated and managed by the government authorities and are non-refundable, whereas the Company has no
access nor any discretion after making contributions, and hence there were not any forfeited contributions as
under paragraph 26(2) of appendix 16 of the Hong Kong Listing Rules for the financial year ended 31 December
2020. In other words, the Group did not forfeit any contributions on behalf of its employees who leave the plan
prior to vesting fully in such contributions. Hence, there were no such an issue whether forfeited contributions
may be used by the Group under paragraph 26(2) of appendix 16 of the Hong Kong Listing Rules for the Group.
During the accounting period in which an employee provides service, the amount payable calculated according
to the defined contribution plan is recognised as a liability and included in the profit or loss for the current period
or the cost of relevant assets.
(4) Termination benefits
When the Group provides termination benefits to employees, employee benefits liabilities arising from
termination benefits are recognised in profit or loss for the current period at the earlier of the following dates:
when the Group cannot revoke unilaterally compensation for dismissal due to the cancellation of labour
relationship plans and employee redundant proposals; the Group recognises cost and expenses related to
payment of compensation for dismissal and restructuring.
For the early retirement plans, economic compensations before the actual retirement date were classified as
termination benefits. During the period from the date of cease of render of services to the actual retirement
date, relevant wages and contribution to social insurance for the employees proposed to be paid are recognised
in profit or loss on a one-off basis. Economic compensation after the official retirement date, such as normal
pension, is accounted for as post-employment benefits.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
23. Employee benefits (Cont’d)
(5) Other long-term employee benefits
Other long-term employee benefits provided by the Group to employees that meet the conditions for defined
contribution plans are accounted for in accordance with the relevant provisions relating to defined contribution
plans as stated above. If the conditions for defined benefit plans are met, the benefits shall accounted for in
accordance with the relevant provisions relating to defined benefit plans, but the “changes arising from the
remeasurement of the net liabilities or net assets of the defined benefit plans” in the relevant employee benefits
shall be included in the current profit or loss or the relevant asset cost.
24. Provisions
Obligations pertinent to the contingencies which satisfy the following conditions are recognised as provisions:
(1) the obligation is a current obligation borne by the Group;
(2) it is likely that an outflow of economic benefits from the Group will be resulted from the performance of the
obligation; and
(3) the amount of the obligation can be reliably measured.
The provisions shall be initially measured based on the best estimate for the expenditure required for the performance
of the current obligation, after taking into account relevant risks, uncertainties, time value of money and other
factors pertinent to the contingencies. If the time value of money has significant influence, the best estimates shall
be determined after discounting the relevant future cash outflow. The Group reviews the carrying amount of the
provisions on the balance sheet date and adjust the carrying amount to reflect the current best estimates.
If all or some expenses incurred for settlement of recognised provisions are expected to be borne by the third party,
the compensation amount shall, on a recoverable basis, be recognised as asset separately, and compensation
amount recognised shall not be more than the carrying amount of provisions.
25. Share-based payments and equity instruments
(1) Category of share-based payment
The Group’s share-based payment is either equity-settled or cash-settled.
(2) Fair value of equity instruments
For the existence of an active market for options and other equity instruments granted by the Group, the fair
value is determined at the quoted price in the active market. For options and other equity instruments with
no active market, option pricing model shall be used to estimate the fair value of the equity instruments. The
following factors shall be taken into account using option pricing models: A. the exercise price of the option, B.
the validity period of the option, C. the current market price of the share, D. the expected volatility of the share
price, E. predicted dividend of the share, and F. risk-free rate of the option within the validity period.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
25. Share-based payments and equity instruments (Cont’d)
(3) Recognition of vesting of equity instruments based on the best estimate
On each balance sheet date within the vesting period, the estimated number of equity instruments expected
to vest is revised based on the best estimate made by the Group according to the latest available subsequent
information as to changes in the number of employees with exercisable rights. On the vesting date, the final
estimated number of equity instruments expected to vest should equal the actual number of equity instruments
expected to vest.
(4) Accounting treatment of implementation, modification and termination of share-based payment
Equity-settled share-based payment shall be measured at the fair value of the equity instruments granted to
employees. For those may immediately vest after the grant, the fair value of equity instrument at the grant date
shall be included in the relevant costs or expenses, and the capital reserve shall be increased accordingly.
If the right may not be exercised until the vesting period comes to an end or until the specified performance
conditions are met, within the vesting period, the services obtained in the current period shall, based on the
best estimate of the number of vested equity instruments, be included in the relevant costs or expenses and the
capital reserve at the fair value of the equity instrument at the grant date. After the vesting period, relevant costs
or expenses and total shareholders’ equity which have been recognised will not be adjusted.
Cash-settled share-based payment shall be measured in accordance with the fair value of liability calculated
and recognised based on the shares or other equity instruments undertaken by the Group. For those may
immediately vest after the grant, the fair value of the liability undertaken by the Group shall, on the date of the
grant, be included in the relevant costs or expenses, and the liabilities shall be increased accordingly. If the right
may not be exercised until the vesting period comes to an end or until the specified performance conditions are
met, within the vesting period, the services obtained in the current period shall, based on the best estimate of
the information about the exercisable right, be included in the relevant costs or expenses and the corresponding
liabilities at the fair value of the liability undertaken by the Group. For each of the balance sheet date and
settlement date before the settlement of the relevant liabilities, fair value of the liabilities shall be remeasured
and the changes will be included in the profit or loss for the current period.
When there are changes in Group’s share-based payment plans, if the modification increases the fair value of
the equity instruments granted, corresponding recognition of service increase in accordance with the increase
in the fair value of the equity instruments; if the modification increases the number of equity instruments
granted, the increase in fair value of the equity instruments is recognised as a corresponding increase in service
achieved. Increase in the fair value of equity instruments refer to the difference between the fair values of the
modified date. If the modification reduces the total fair value of shares paid or not conductive to the use of other
employees share-based payment plans to modify the terms and conditions of service, it will continue to be
accounted for in the accounting treatment, as if the change had not occurred, unless the Group cancelled some
or all of the equity instruments granted.
During the vesting period, if the cancelled equity instruments (except for failure to meet the conditions of
the non-market vesting conditions) granted by the Group to cancel the equity instruments granted amount
treated as accelerated vesting of the remaining period should be recognised immediately in profit or loss, while
recognising capital reserves. If employees or other parties can choose to meet non-vesting conditions but they
are not met in the vesting period, the Group will treat them as cancelled equity instruments granted.
2020 ANNUAL REPORT 195
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
26. Preference Shares, Perpetual Bonds and other financial instruments
(1) Classification of financial liabilities and equity instruments
Financial instruments issued by the Group are classified into financial assets, financial liabilities or equity
instruments on the basis of the substance of the contractual arrangements and the economic nature not only
its legal form, together with the definition of financial asset, financial liability and equity instruments on initial
recognition.
(2) Accounting treatment of Preference Shares, Perpetual Bonds and other financial instruments
Financial instruments issued by the Group are initially recognised and measured in accordance with the
financial instrument standards; thereafter, interest or dividends are accrued on each balance sheet date
and accounted for in accordance with relevant specific ASBEs, i.e. to determine the accounting treatment
for interest expenditure or dividend distribution of the instrument based on the classification of the financial
instrument issued. For financial instruments classified as equity instruments, their interest expenses or dividend
distributions are treated as profit distribution of the Group, and their repurchases and cancellations are treated
as changes in equity; for financial instruments classified as financial liabilities, their interest expenses or dividend
distribution are in principle accounted for with reference to borrowing costs, and the gains or losses arising from
their repurchases or redemption are included in the profit or loss for the current period.
For the transaction costs such as fees and commissions incurred by the Group for issuing financial instruments,
if such financial instruments are classified as debt instruments and measured at amortised cost, they are
included in the initial measured amount of the instruments issued; if such financial instruments are classified as
equity instruments, they are deducted from equity.
27. Revenue
(1) General principles
The Group recognises revenue when it satisfies a performance obligation in the contract, i.e. when the customer
obtains control of the relevant goods or services.
Where a contract has two or more performance obligations, the Group allocates the transaction price to each
performance obligation based on the percentage of respective unit price of goods or services guaranteed by
each performance obligation, and recognises as revenue based on the transaction price that is allocated to
each performance obligation.
If one of the following conditions is fulfilled, the Group performs its performance obligation within a certain
period; otherwise, it performs its performance obligation at a point of time:
when the customer simultaneously receives and consumes the benefits provided by the Group when the
Group performs its obligations under the contract;
when the customer is able to control the goods in progress in the course of performance by the Group
under the contract;
when the goods produced by the Group under the contract are irreplaceable and the Group has the right
to payment for performance completed to date during the whole contract term.
196 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Cont’d)
27. Revenue (Cont’d)
(1) General principles (Cont’d)
For performance obligations performed within a certain period, the Group recognises revenue by measuring
the progress towards complete of that performance obligation within that certain period. When the progress
of performance cannot be reasonably determined, if the costs incurred by the Group are expected to
be compensated, the revenue shall be recognised at the amount of costs incurred until the progress of
performance can be reasonably determined.
For performance obligation performed at a point of time, the Group recognises revenue at the point of time
at which the customer obtains control of relevant goods or services. To determine whether a customer has
obtained control of goods or services, the Group considers the following indications:
the Group has the current right to receive payment for the goods, which is when the customer has the
current payment obligations for the goods;
the Group has transferred the legal title of the goods to the customer, which is when the client possesses
the legal title of the goods;
the Group has transferred the physical possession of goods to the customer, which is when the customer
obtains physical possession of the goods;
the Group has transferred all of the substantial risks and rewards of ownership of the goods to the
customer, which is when the customer obtain all of the substantial risks and rewards of ownership of the
goods to the customer;
the customer has accepted the goods;
other information indicates that the customer has obtained control of the goods.
The Group’s right to consideration in exchange for goods or services that the Group has transferred to
customers (and such right depends on factors other than passage of time) is accounted for as contract assets,
and contract assets are subject to impairment based on ECLs. The Group’s unconditional right to receive
consideration from customers (only depends on passage of time) is accounted for as accounts receivable.
The Group’s obligation to transfer goods or services to customers for which the Group has received or should
receive consideration from customers is accounted for as contract liabilities.
Contract assets and contract liabilities under the same contract are presented on a net basis. Where the net
amount has a debit balance, it is presented in “contract assets” or “other non-current assets” according to its
liquidity. Where the net amount has a credit balance, it is presented in “contract liabilities” or “other non-current
liabilities” according to its liquidity.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
27. Revenue (Cont’d)
(2) Specific methods
Specific method for revenue recognition of machine-made paper business of the Group: in terms of domestic
sales of machine-made paper, revenue is recognised when goods are delivered to the customers and such
deliveries are confirmed; while in terms of overseas sales of machine-made paper, revenue is recognised on the
day when goods are loaded on board and declared.
Specific method for recognition of finance lease income of the Group: according to the repayment schedule, the
income is recognised by instalments according to the effective interest rate.
Specific method for recognition of revenue from real estate of the Group: revenue is recognised by amortising
the rental income on a straight-line basis over the lease term.
28. Government grants
A government grant is recognised when there is reasonable assurance that the grant will be received and that the
Group will comply with the conditions attaching to the grant.
If a government grant is in the form of a transfer of a monetary asset, it is measured at the amount received or
receivable. If a government grant is in the form of a transfer of non-monetary asset, it is measured at fair value; if the
fair value cannot be obtained in a reliable way, it is measured at the nominal amount of RMB1.
Government grants obtained for acquisition or construction of long-term assets or other forms of long-term asset
formation are classified as government grants related to assets, while the remaining government grants are classified
as government grants related to revenue.
Regarding the government grant not clearly defined in the official documents and can form long-term assets, the
part of government grant which can be referred to the value of the assets is classified as government grant related
to assets and the remaining part is government grant related to revenue. For the government grant that is difficult to
distinguish, the entire government grant is classified as government grant related to revenue.
A government grant related to an asset shall be recognised as deferred income, and evenly amortised to profit or loss
over the useful life of the asset in a reasonable and systematic manner. For a government grant related to revenue,
if the grant is a compensation for related costs, expenses or losses incurred, the grant shall be recognised in profit
or loss for the current period; if the grant is a compensation for related costs, expenses or losses to be incurred
in subsequent periods, the grant shall be recognised as deferred income, and recognised in profit or loss over the
periods in which the related costs, expenses or losses are recognised. A government grant measured at nominal
amount is directly included in profit or loss for the current period. The Group adopts a consistent approach to the
same or similar government grants.
A government grant related to daily activities is recognised in other gains relying on the essence of economic
business; otherwise, recognised in non-operating income or non-operating expenses.
For the repayment of a government grant already recognised, if there is any related deferred income, the repayment
shall be off set against the carrying amount of the deferred income, and any excess shall be recognised in profit or
loss for the current period; otherwise, the repayment shall be recognised immediately in profit or loss for the current
period.
198 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Cont’d)
28. Government grants (Cont’d)
For the policy preferential interest subsidy, if it is provided by the financial authority through banks, it is recognised
at the amount of borrowings actually received, and the borrowings costs are calculated based on the principal
of the borrowings and the policy preferential interest rate; if it is provided by the financial authority directly, the
corresponding interest will be used to offset the relevant borrowing expenses.
29. Deferred income tax assets/deferred income tax liabilities
Income tax comprises current income tax expense and deferred income tax expense, which are included in profit or
loss for the current period as income tax expenses, except for deferred tax related to transactions or events that are
directly recognised in owners’ equity which are recognised in owners’ equity, and deferred tax arising from a business
combination, which is adjusted against the carrying amount of goodwill.
Temporary differences arising from the difference between the carrying amount of an asset or liability and its tax base
at the balance sheet date of the Group shall be recognised as deferred income tax using the balance sheet liability
method.
All the taxable temporary differences are recognised as deferred income tax liabilities except for those incurred in the
following transactions:
(1) The initial recognition of goodwill, and the initial recognition of an asset or liability in a transaction which is
neither a business combination nor affects accounting profit or taxable profit (or deductible loss) when the
transaction occurs;
(2) The taxable temporary differences associated with investments in subsidiaries, associates and joint ventures,
and the Group is able to control the timing of the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future.
The Group recognises a deferred income tax asset for the carry forward of deductible temporary differences,
deductible losses and tax credits to subsequent periods, to the extent that it is probable that future taxable profits
will be available against which the deductible temporary differences, deductible losses and tax credits can be utilised,
except for those incurred in the following transactions:
(1) The transaction is neither a business combination nor affects accounting profit or taxable profit (or deductible
loss) when the transaction occurs;
(2) The deductible temporary differences associated with investments in subsidiaries, associates and joint ventures,
the corresponding deferred income tax asset is recognised when both of the following conditions are satisfied:
it is probable that the temporary difference will reverse in the foreseeable future, and it is probable that taxable
profits will be available in the future, against which the temporary difference can be utilised.
At the balance sheet date, deferred income tax assets and deferred income tax liabilities are measured at the tax
rates that are expected to apply to the period when the asset is realised or the liability is settled, and their tax effect is
reflected accordingly.
At the balance sheet date, the Group reviews the carrying amount of a deferred income tax asset. If it is probable
that sufficient taxable profits will not be available in future periods to allow the benefit of the deferred tax asset to be
utilised, the carrying amount of the deferred tax asset is reduced. Any such reduction in amount is reversed when it
becomes probable that sufficient taxable profits will be available.
2020 ANNUAL REPORT 199
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
30. Lease
(1) Identification of leases
On the beginning date of the contract, the Group (as a lessee or lessor) assesses whether the customer in
the contract has the right to obtain substantially all of the economic benefits from use of the identified asset
throughout the period of use and has the right to direct the use of the identified asset throughout the period of
use. If a contract conveys the right to control the use of an identified asset and multiple identified assets for a
period of time in exchange for consideration, the Group identifies such contract is, or contains, a lease.
(2) The Group as lessee
On the beginning date of the lease, the Group recognises right-of-use assets and lease liabilities for all leases,
except for short-term lease and low-value asset lease with simplified approach.
The accounting policy for right-of-use assets is set out in Note V. 31.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
beginning date of the lease using the interest rate implicit in the lease or the incremental borrowing rate. Lease
payments include fixed payments and in-substance fixed payments, less any lease incentives receivable;
variable lease payments that are based on an index or a rate; the exercise price of a purchase option if the
lessee is reasonably certain to exercise that option; payments for terminating the lease, if the lease term reflects
the lessee exercising that option of terminating; and amounts expected to be payable by the lessee under
residual value guarantees. Subsequently, the interest expense on the lease liability for each period during the
lease term is calculated using a constant periodic rate of interest and is recognised in profit or loss for the
current period. Variable lease payments not included in the measurement of lease liabilities are charged to
profit or loss in the period in which they actually arise. The Group calculates the interest expense of the lease
liability for each period of the lease term based on the fixed periodic interest rate and is included in the current
profit and loss. The variable lease payments that are not included in the measurement of the lease liability are
recognised in profit or loss when incurred.
200 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Cont’d)
30. Lease (Cont’d)
(2) The Group as lessee (Cont’d)
Short-term lease
Short-term leases refer to leases with a lease term of less than 12 months from the commencement date,
except for those with a purchase option.
Lease payments on short-term leases are recognised in the cost of related assets or current profit or loss on a
straight-line basis over the lease term.
For short-term leases, the Group chooses to adopt the above simplified approach for the following types of
assets that meet the conditions of short-term lease according to the classification of leased assets.
Low-value machinery and equipment
Transportation vehicles
Low-value asset lease
A low-value asset lease is a lease that the value of a single leased asset is below RMB2,000,000 when it is a
new asset.
For a low-value asset lease, the Group chooses the above simplified approach based on the specific
circumstances of each lease.
Lease payments on low-value asset leases are recognised on a straight-line basis over the lease term, and
either included in the cost of the related asset or charged to profit or loss for the current period.
(3) The Group as lessor
When the Group is a lessor, a lease is classified as a finance lease whenever the terms of the lease transfer
substantially all the risks and rewards of asset ownership to the lessee. All leases other than financial leases are
classified as operating leases.
Operating lease
Lease payments under operating leases are recognised in profit or loss on a straight-line basis over the lease
term. Initial direct costs incurred in relation to operating leases are capitalised and amortised over the lease term
on the same basis as rental income and recognised in profit or loss for the current period. The variable lease
payments obtained in relation to operating leases that are not included in the lease payments are recognised in
profit or loss in the period in which they actually incurred.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
30. Lease (Cont’d)
(4) Sublease
When the Group is an intermediate lessor, the sublease is classified with reference to the right-of-use assets
arising from the head lease. If the head lease is a short-term lease for which the Group adopts a simplified
approach, then the Group classifies the sublease as an operating lease.
(5) Sale and leaseback
The lessee and the lessor shall assess and determine whether the transfer of assets in a sale and leaseback
transaction is a sale in accordance with the requirements of the Accounting Standard for Business Enterprises
No. 14 – Revenue.
Where asset transfer under the sale and leaseback transactions is a sale, the lessee shall measure the
right-of-use assets created by the sale and leaseback based on the portion of carrying amount of the original
assets related to right of use obtained upon leaseback, and only recognise relevant profit or loss for the right
transferred to the lessor. The lessor shall account for the purchase of assets in accordance with other applicable
ASBEs and account for the lease of assets in accordance with this standard.
Where asset transfer under the sale and leaseback transactions is not a sale, the lessee shall continue to
recognise the transferred assets while recognising a financial liability equal to the transfer income and account
for such liability according to the Accounting Standard for Business Enterprises No. 22 – Recognition and
Measurement of Financial Instruments; or not to recognise the transferred assets but recognise a financial asset
equal to the transfer income and account for such asset according to the Accounting Standard for Business
Enterprises No. 22 – Recognition and Measurement of Financial Instruments.
31. Right-of-use assets
(1) Conditions for recognition of right-of-use assets
Right-of-use assets of the Group are defined as the right of underlying assets in the lease term for the Group as
a lessee.
Right-of-use assets are initially measured at cost at the commencement date of the lease. The cost includes
the amount of the initial measurement of lease liability; lease payments made at or before the inception of the
lease less any lease incentives enjoyed; initial direct costs incurred by the Group as lessee; costs to be incurred
in dismantling and removing the underlying assets, restoring the site on which it is located or restoring the
underlying asset to the condition required by the terms and conditions of the lease incurred by the Group as
lessee. As a lessee, the Group recognises and measures the costs of dismantling and restoration in accordance
with the Accounting Standard for Business Enterprises No. 13 – Contingencies. Subsequently, the lease liability
is adjusted for any remeasurement of the lease liability.
(2) Depreciation method of right-of-use assets
The Group uses the straight-line method for depreciation. Where the Group, as a lessee, is reasonably certain to
obtain ownership of the leased asset at the end of the lease term, such asset is depreciated over the remaining
useful life of the leased asset. Where ownership of the lease assets during the lease term cannot be reasonably
determined, right-of-use assets are depreciated over the lease term or the remainder of useful lives of the lease
assets, whichever is shorter.
(3) For the methods of impairment test and impairment provision of right-of-use assets, please refer to Note V. 21.
202 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Cont’d)
32. General risk reserves
General risk reserve is a reserve provided from net profit for the partial offset unidentified possible losses.
Adopting the principle of dynamic provisioning, the Finance Company employs the standard method to quantitatively
analyse the risk situation faced by risk assets, to determine the estimated potential risk value. After calculating
the potential risk value, if the potential risk value is higher than the provision for impairment of assets, the accrued
provision for impairment of assets will be deducted and provision for general risk will be made. If the potential risk
value is lower than the provision for impairment of assets, provision for general risk will not be made.
Dynamic provisioning is a counter-cyclical provisioning method adopted by financial companies based on changes
in the macroeconomic situation, as in, in the upward macroeconomic cycle and when the risk asset default rate is
relatively low, more provisions are made to enhance financial buffer capacity; and in the downturn macroeconomic
cycle and when the risk asset default rate is relatively high, the accumulated provisions are used to absorb asset
losses.
The Finance Company makes general risk provisions for assets bearing risks and losses at the end of each year, the
balance of which, in principle, shall not be lower than 1.5% of the closing balance of risk assets. The risk provision
made by factoring companies shall not be lower than 1% of the closing balance of the financial factoring business.
Based on changes in the macroeconomic situation, and with reference to non-performing corporate loans,
non-performing loan ratio, provision coverage ratio for non-performing loans, loan provision ratio, standard risk
factor and the requirement of general risk provision as a percentage of risk assets, the Ministry of Finance makes
adjustments to the scope of risk assets for general risk provisions, standard risk factor and the requirement of
general risk provision as a percentage of risk assets as appropriate. The Finance Company shall make adjustments
accordingly according to the requirements of the Ministry of Finance.
Provisions for general risk are insufficient, in principle, the company shall not engage in after-tax profit distribution.
As considered and approved by the board of directors and general meeting of the Finance Company, such provisions
may be used to offset losses but not for dividends. For special reasons, as approved by the Board and the general
meeting, general risk reserves may be reclassified into undistributed profits.
2020 ANNUAL REPORT 203
XIII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Cont’d)
33. Critical accounting judgments and estimates
The Group gives continuous assessment on, among other things, the reasonable expectations of future events and
the critical accounting estimates and key assumptions adopted according to its historical experience and other
factors. The critical accounting estimates and key assumptions that are likely to lead to significant adjustment risks of
the carrying amount of assets and liabilities for the next financial year are listed as follows:
Classification of financial assets
Significant judgements involved in determining the classification of financial assets include the analysis of business
models and contractual cash flow characteristics.
Factors considered by the Group in determining the business model for a group of financial assets include how the
asset’s performance is evaluated and reported to key management personnel, how risks are assessed and managed
and how the relevant management personnel are compensated.
When the Group assesses whether the contractual cash flows of the financial assets are consistent with basic lending
arrangements, the main judgements are described as below: whether the principal amount may change over the life of
the financial asset (for example, if there are repayments of principal); whether the interest includes only consideration
for the time value of money, credit risk, other basic lending risks and a profit margin and cost. For example, whether
the amount repaid in advance reflects only the outstanding principal and interest thereon, as well as reasonable
compensation paid for early termination of the contract.
Measurement of the ECLs of accounts receivable
The Group calculates the ECLs of accounts receivable using the exposure to default risk and ECL rate of accounts
receivable, and determines the ECL rate based on default probability and default loss rate. When determining the ECL
rate, the Group adjusts its historical data by referring to information such as historical credit loss experience as well
as current situation and forward-looking information. When considering the forward-looking information, indicators
used by the Group include the risk of economic downturn, external market environment, technology environment and
changes in customers. The assumptions relating to the ECL calculation are monitored and reviewed by the Group on
a regularly basis.
Deferred income tax assets
Deferred income tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit
will be available against which the losses can be utilised. Significant management judgement is required to determine
the amount of deferred income tax assets that can be recognised, based upon the likely timing and level of future
taxable profits together with future tax planning strategies.
Share-based payments
When calculating the liabilities and expenses related to the equity incentive plan, the management of the Company is
required to make judgments and estimates on issues such as the turnover rate and vesting conditions. Differences in
the judgments and estimates will have a material effect on the financial statements.
Impairment of goodwill
The Group assesses the impairment of goodwill at least annually, which requires estimates on the use value of asset
groups allocated with goodwill. When estimating use value, the Group is required to estimate the future cash flow
from such asset groups while selecting the appropriate discount rate to calculate the present value of future cash
flow.
204 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Cont’d)
33. Critical accounting judgments and estimates (Cont’d)
Impairment of goodwill (Cont’d)
Depreciation
The Group uses the straight-line method for depreciation within the estimated useful lives of fixed assets after taking
into account their residue value. The Group regularly reviews the expected useful lives to determine the amount of
depreciation accounted for each reporting period. Expected useful life is determined based on historical experience
of similar assets and the estimated technical changes. Depreciation expenses for future periods will be adjusted
accordingly in the event of significant changes in previous estimates.
34. Changes in significant accounting policies and estimates
(1) Changes in significant accounting policies
Accounting Standards for Business Enterprises Interpretation No. 13
In December 2019, the Ministry of Finance issued the Accounting Standards for Business Enterprises
Interpretation No. 13 (Cai Kuai [2019] No. 21) (hereinafter referred to as the “Interpretation No. 13”).
The Interpretation No. 13 modified the three factors constituting a business, specified the determining
conditions for businesses, and introduced “concentration test” for purchasers in business combinations
under common control when determining whether the operating activities or asset portfolio acquired
constitutes a business.
The Interpretation No. 13 clarified that the related parties of an enterprise include the associates and joint
ventures of other common member units, including parent companies and subsidiaries, of the group, as
well as the associates and joint ventures of investors in joint control of the enterprise.
The Interpretation No. 13 came into effect on 1 January 2020. The Group has applied the prospective
application method for the accounting treatment of the above change in accounting policies.
The application of Interpretation No. 13 did not have any material effect on the financial position, operating
results or related party disclosure of the Group.
In June 2019, the Ministry of Finance issued the Notice on Provisions on Accounting Treatment of Covid-
19-related Rent Concessions (Cai Kuai [2020] No. 10) (
2020 10 )). Under such accounting treatment, a simplified approach may be applied for
the Covid-19-related rent concessions.
The Group did not apply the simplified approach under the notice. As such, the notice did not have any
material effect on the financial position or operating results of the Group.
(2) Changes in significant accounting estimates
The Group did not have any changes in significant accounting estimates during the year.
(3) Adjustment to the relevant items in the financial statements at the beginning of the year due to the first
adoption of the New Revenue Standard and the New Leases Standard in 2020
Not applicable
(4) Reason for retrospective adjustment to the comparative data in the prior period due to the first adoption of
the New Revenue Standard and the New Leases Standard in 2020
Applicable √ Not applicable
2020 ANNUAL REPORT 205
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VI. Taxation
1. Main tax types and tax rates
Tax type Tax base Tax rate (%)
Value added tax (VAT) Taxable income 13/9/6
Urban maintenance and construction tax Turnover tax payable 7
Enterprise income tax (EIT) Taxable income 25
Property tax Rental income and property price 1.2/12
Disclosure of taxable entities subject to different EIT tax rates
Name of taxable entity EIT tax rate (%)
Shandong Chenming Paper Holdings Limited 15
Shouguang Meilun Paper Co., Ltd. 15
Jilin Chenming Paper Co., Ltd. 15
Jiangxi Chenming Paper Co., Ltd. 15
Zhanjiang Chenming Pulp & Paper Co., Ltd. 15
Wuhan Chenming Hanyang Paper Holdings Co., Ltd. 15
Huanggang Chenming Pulp & Paper Co., Ltd. 15
Kunshan Tuoan Plastic Products Co., Ltd. 15
Shouguang Shun Da Customs Declaration Co, Ltd. 10
Qingdao Chenming Pulp & Paper Electronic Commodity Spot Trading Co., Ltd. 10
Zhanjiang Chenming Arboriculture Development Co., Ltd. Exempt from EIT
Nanchang Chenming Arboriculture Development Co., Ltd. Exempt from EIT
Chenming Arboriculture Co., Ltd. Exempt from EIT
Yangjiang Chenming Arboriculture Development Co., Ltd. Exempt from EIT
2. Tax incentives
(1) Enterprise income tax
On 16 August 2018, the Group received a high and new technology enterprise certificate with a certification
number of GR201837000311. Pursuant to the requirements under the Law of the People’s Republic of China on
Enterprise Income Tax and the relevant policies, the Group is subject to a corporate income tax rate of 15% of
taxable income, and is entitled to the preferential treatment from 2018 to 2020.
Shouguang Meilun Paper Co., Ltd., a subsidiary of the Group, received a high and new technology enterprise
certificate with a certification number of GR201837000455 on 16 August 2018. Pursuant to the requirements
under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant policies, Shouguang
Meilun is subject to an enterprise income tax rate of 15% of taxable income, and is entitled to the preferential
treatment from 2018 to 2020.
Jilin Chenming Paper Co., Ltd., a subsidiary of the Group, received a high and new technology enterprise
certificate with a certification number of GR201922000658 on 2 September 2019. Pursuant to the requirements
under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant policies, Jilin
Chenming is subject to an enterprise income tax rate of 15% of taxable income, and is entitled to the
preferential treatment from 2019 to 2021.
206 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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VI. Taxation (Cont’d)
2. Tax incentives (Cont’d)
(1) Enterprise income tax (Cont’d)
Jiangxi Chenming Paper Co., Ltd., a subsidiary of the Group, received a high and new technology enterprise
certificate with a certification number of GR201936002184 on 3 December 2019. Pursuant to the requirements
under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant policies, Jiangxi
Chenming is subject to an enterprise income tax rate of 15% of taxable income, and is entitled to the
preferential treatment from 2019 to 2021.
Zhanjiang Chenming Pulp & Paper Co., Ltd., a subsidiary of the Group, received a high and new technology
enterprise certificate with a certification number of GR20184400547 on 28 November 2018. Pursuant to the
requirements under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant
policies, Zhanjiang Chenming is subject to an enterprise income tax rate of 15% of taxable income, and is
entitled to the preferential treatment from 2018 to 2020.
Wuhan Chenming Hanyang Paper Holdings Co., Ltd., a subsidiary of the Group, received a high and new
technology enterprise certificate with a certification number of GR202042001502 on 1 December 2020. Pursuant
to the requirements under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant
policies, Wuhan Chenming is subject to an enterprise income tax rate of 15% of taxable income, and is entitled
to the preferential treatment from 2020 to 2022.
Huanggang Chenming Pulp & Paper Co., Ltd., a subsidiary of the Group, received a high and new technology
enterprise certificate with a certification number of GR202042001471 on 1 December 2020. Pursuant to the
requirements under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant
policies, Huanggang Chenming is subject to an enterprise income tax rate of 15% of taxable income, and is
entitled to the preferential treatment from 2020 to 2022.
Kunshan Tuoan Plastic Products Co., Ltd., a subsidiary of the Group, received a high and new technology
enterprise certificate with a certification number of GR202032004526 on 2 December 2020. Pursuant to the
requirements under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant
policies, Kunshan Tuoan is subject to an enterprise income tax rate of 15% of taxable income, and is entitled to
the preferential treatment from 2020 to 2022.
Pursuant to the requirements of Rule 27(1) of Law of the People’s Republic of China on Enterprise Income Tax
and Rule 86(1) of regulations for the Implementation of Law of the People’s Republic of China on Enterprise
Income Tax, Zhanjiang Chenming Arboriculture Development Co., Ltd., Yangjiang Chenming Arboriculture
Development Co., Ltd., Nanchang Chenming Arboriculture Development Co., Ltd. and Chenming Arboriculture
Co., Ltd., which are the subsidiaries of the Group, have completed the filings for EIT reduction for exemption
from EIT.
Shouguang Shun Da Customs Declaration Co, Ltd. and Qingdao Chenming Pulp & Paper Electronic Commodity
Spot Trading Co., Ltd., which are subsidiaries of the Group, are small and micro enterprises. Pursuant to the
Notice on Implementing the Inclusive Tax Deduction and Exemption Policies for Micro and Small Enterprises (Cai
Shui [2019] No. 13), the annual taxable income of a small low-profit enterprise that is more than RMB1 million
but not exceeding RMB3 million shall be included in its taxable income at a reduced rate of 50%, with the
applicable enterprise income tax rate of 10%.
2020 ANNUAL REPORT 207
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VI. Taxation (Cont’d)
2. Tax incentives (Cont’d)
(1) Enterprise income tax (Cont’d)
Guangdong Chenming Panels Co., Ltd., a subsidiary of the Group, meets the requirements of Rule 99 of the
Regulations for the Implementation of Law of the People’s Republic of China on Enterprise Income Tax (Decree
No. 512 of the State Council of the People’s Republic of China) and the Notice of the Ministry of Finance and
the State Taxation Administration on Issues Concerning the Implementation of the Catalogue of Preferential
Tax Treatments for Comprehensive Resource Utilisation Enterprises (Cai Shui [2008] No. 47): since 1 January
2008, for enterprises that derive income from the products listed in the Catalogue which are in line with related
national or industry standards by making use of the resources listed in the Catalogue as the main raw materials,
taxable income will be calculated at a reduced rate of 90% of the total revenue for that year. To be entitled
to the above tax benefits, the ratio of the resources listed in the Catalogue and the raw materials used for the
product shall be consistent with the required technical standards stated in the Catalogue.
(2) Value-added Tax (“VAT”)
Pursuant to Rule 10 of the Interim Regulation of the People’s Republic of China on Value Added Tax, Zhanjiang
Chenming Arboriculture Development Co., Ltd., Yangjiang Chenming Arboriculture Development Co., Ltd.,
Nanchang Chenming Arboriculture Development Co., Ltd. and Chenming Arboriculture Co., Ltd., which are
subsidiaries of the Group, are exempt from VAT, and have completed the filings for VAT reduction for exemption
from VAT.
Pursuant to the Value-added Tax Preferential Catalogue on Products and Services Applying Integrated Use of
Resources (Cai Shui [2015] No. 78), taxpayers who sell self-produced products and services applying integrated
use of resources may enjoy the immediate VAT refund policy. Zhanjiang Chenming New-style Wall Materials
Co., Ltd., a subsidiary of the Company, produces products applying raw materials containing more than 30% of
fly ash. It belongs to a company that uses pollutants for production, and is therefore subject to the immediate
VAT refund policy in 2019.
Pursuant to the Value-added Tax Preferential Catalogue on Products and Services Applying Integrated Use
of Resources (Cai Shui [2015] No. 78), taxpayers who sell self-produced products and services applying
integrated use of resources may enjoy the immediate VAT refund policy. Shandong Chenming Panels Co., Ltd.,
a subsidiary of the Group, produces products applying integrated use of resources, and is therefore subject to
the immediate VAT refund policy in 2019.
Pursuant to the Value-added Tax Preferential Catalogue on Products and Services Applying Integrated Use of
Resources (Cai Shui [2015] No. 78), taxpayers who sell self-produced products and services applying integrated
use of resources may enjoy the immediate VAT refund policy. Shouguang Chenming Cement Co., Limited, a
subsidiary of the Company, produces products applying integrated use of resources, and is therefore subject to
the immediate VAT refund policy in 2019.
Pursuant to the Value-added Tax Preferential Catalogue on Products and Services Applying Integrated Use of
Resources (Cai Shui [2015] No. 78), taxpayers who sell self-produced products and services applying integrated
use of resources may enjoy the immediate VAT refund policy. Guangdong Chenming Panels Co., Ltd., a
subsidiary of the Company, produces products applying integrated use of resources, and is therefore subject to
the immediate VAT refund policy in 2020.
208 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements
1. Monetary funds
Unit: RMB
Item Closing balance Opening balance
Treasury cash 2,161,684.57 2,418,131.86
Bank deposit 4,387,725,487.05 2,965,127,198.70
Other monetary funds 13,369,650,427.36 16,338,984,142.77
Total 17,759,537,598.98 19,306,529,473.33
Of which: Total deposits in overseas banks 229,837,092.53 405,881,189.78
Other explanation
Other monetary funds of RMB9,078,202,110.72 were the guarantee deposit for the application for bank acceptance with the banks by
the Group;
Other monetary funds of RMB1,782,633,856.06 were the guarantee deposit for the application for letter of credit with the banks by the
Group;
Other monetary funds of RMB1,959,246,666.67 were the guarantee deposit for the application for guarantees with the banks by the
Group;
Other monetary funds of RMB50,000,000.00 were the guarantee deposit for the application for loans with the banks by the Group;
Other monetary funds of RMB141,670,000.00 were the Group’s statutory reserve deposits at the People’s Bank of China;
Other monetary funds of RMB10,899,698.53 were locked-up due to litigations, resulting in restriction on the use of that account’s
balance;
Bank deposit included interest receivable of RMB717,207.83, and other monetary funds included interest receivable of
RMB346,998,095.38.
2. Financial assets held for trading
Unit: RMB
Item Closing balance Opening balance
Financial assets measured at fair value through profit or loss 192,907,800.62
Or which:
Investment in debt instruments
Investment equity instruments 192,907,800.62
Total 192,907,800.62
Other explanation:
Financial assets held for trading were shares of Bohai Bank subscribed by the Group. For details of restricted ownership, please refer to note
VII. 63.
2020 ANNUAL REPORT 209
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VII. Notes to items of the consolidated financial statements (Cont’d)
3. Accounts receivable
(1) Disclosure of accounts receivable by category
Unit: RMB
Closing balance Opening balance
Book balance Bad debt provision Carrying amount Book balance Bad debt provision Carrying amount
Category Amount Percentage Amount ECL rate Amount Percentage Amount ECL rate
Accounts receivable assessed
individually for impairment 338,943,643.26 13.70% 338,943,643.26 100.00% 117,277,135.48 3.81% 117,277,135.48 100.00%
Of which:
Accounts receivable assessed
collectively for impairment 2,135,216,813.32 86.30% 150,285,147.50 7.04% 1,984,931,665.82 2,960,085,058.36 96.19% 435,001,747.33 14.70% 2,525,083,311.03
Of which:
Due from related party customers 2,000,017.96 0.08% 87,306.27 4.37% 1,912,711.69 2,008,185.60 0.07% 61,132.79 3.04% 1,947,052.81
Receivables from non-related
party customers 1,815,359,418.67 73.37% 97,096,893.56 5.35% 1,718,262,525.11 2,202,548,603.03 71.57% 307,333,600.84 13.95% 1,895,215,002.19
Factoring receivables 317,857,376.69 12.85% 53,100,947.67 16.71% 264,756,429.02 755,528,269.73 24.55% 127,607,013.70 16.89% 627,921,256.03
Total 2,474,160,456.58 100.00% 489,228,790.76 19.77% 1,984,931,665.82 3,077,362,193.84 100.00% 552,278,882.81 17.95% 2,525,083,311.03
210 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
3. Accounts receivable (Cont’d)
(1) Disclosure of accounts receivable by category (Cont’d)
Items assessed collectively for impairment: Due from related party customers
Unit: RMB
Closing balance
Provision for
Name Book balance bad debts ECL rate
Within 1 year 2,000,017.96 87,306.27 4.37%
Total 2,000,017.96 87,306.27 4.37%
Items assessed collectively for impairment: Receivables from non-related party customers
Unit: RMB
Closing balance
Provision for
Name Book balance bad debts ECL rate
Within 1 year 1,660,479,726.06 21,400,551.31 1.29%
1-2 years 48,566,847.64 12,188,852.33 25.10%
2-3 years 54,156,967.00 21,851,050.46 40.35%
Over 3 years 52,155,877.97 41,656,439.46 79.87%
Total 1,815,359,418.67 97,096,893.56 5.35%
Items assessed collectively for impairment: Factoring receivables
Unit: RMB
Closing balance
Provision for
Name Book balance bad debts ECL rate
Within 1 year 25,548,333.33 2,554,833.33 10.00%
1-2 years 267,626,380.93 45,496,484.76 17.00%
2-3 years 24,682,662.43 5,049,629.58 20.46%
Total 317,857,376.69 53,100,947.67 16.71%
2020 ANNUAL REPORT 211
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
3. Accounts receivable (Cont’d)
(1) Disclosure of accounts receivable by category (Cont’d)
If the bad debt provision of accounts receivable is made in accordance with the general model of ECLs, please
disclose the information about bad debt provision with reference to the way of disclosure of other receivables:
√ Applicable Not applicable
Disclosure by ageing
Unit: RMB
Ageing Closing balance Opening balance
Within 1 year (including 1 year) 1,822,584,474.74 2,440,760,038.21
1 to 2 years 379,812,071.80 397,312,284.08
2 to 3 years 87,426,356.99 70,484,233.21
Over 3 years 184,337,553.05 168,805,638.34
Total 2,474,160,456.58 3,077,362,193.84
(2) Provision, recovery or reversal of bad debt provision for the period
Bad debt provision for the period:
Unit: RMB
Changes in the period
Recovery
Category Opening balance Provision or reversal Written off Others Closing balance
Provision for bad debt 552,278,882.81 237,262,669.97 300,285,138.80 27,623.22 489,228,790.76
Total 552,278,882.81 237,262,669.97 300,285,138.80 27,623.22 489,228,790.76
212 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
3. Accounts receivable (Cont’d)
(3) Top five accounts receivable based on closing balance of debtors
Unit: RMB
Percentage to
closing balance
Closing balance of the total Closing balance
of the accounts accounts of bad debt
Name of entity receivable receivable provision
Customer 1 148,138,960.00 5.99% 14,813,896.00
Customer 2 119,885,303.24 4.84% 846,868.40
Customer 3 107,218,333.33 4.33% 21,443,666.67
Customer 4 100,887,437.12 4.08% 712,667.69
Customer 5 55,101,035.00 2.23% 389,233.07
Total 531,231,068.69 21.47% 38,206,331.83
4. Accounts receivable financing
Unit: RMB
Item Closing balance Opening balance
Bills receivable 488,385,666.76 442,915,861.70
Total 488,385,666.76 442,915,861.70
Changes (increase or decrease) during the period and change in fair value of accounts receivable financing
Applicable √ Not applicable
If the provision for impairment of accounts receivable financing is made in accordance with the general model of
ECLs, please disclose the information about provision for impairment with reference to the way of disclosure of other
receivables:
Applicable √ Not applicable
2020 ANNUAL REPORT 213
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VII. Notes to items of the consolidated financial statements (Cont’d)
5. Prepayments
(1) Disclosure of prepayments stated according to ageing analysis
Unit: RMB
Closing balance Opening balance
Ageing Amount Percentage Amount Percentage
Within 1 year 871,877,663.55 90.42% 528,554,005.66 87.57%
1-2 years 92,412,848.81 9.58% 75,019,543.42 12.43%
Total 964,290,512.36 100% 603,573,549.08 100%
(2) Top five prepayments according to closing balance of prepaid parties
Top five prepayments according to closing balance of prepaid parties for the period amounted to
RMB470,067,160.71, which accounted for 48.75% of the closing balance of the total accounts payable.
Percentage of the
closing balance
Closing balance of of the total
Name of entity the prepayments prepayments
Customer 1 123,727,868.43 12.83%
Customer 2 113,846,592.74 11.81%
Customer 3 99,901,540.92 10.36%
Customer 4 70,400,984.10 7.30%
Customer 5 62,190,174.52 6.45%
Total 470,067,160.71 48.75%
214 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
6. Other receivables
Unit: RMB
Item Closing balance Opening balance
Dividend receivables 13,000,000.00
Other receivables 2,417,240,559.46 2,203,654,598.66
Total 2,417,240,559.46 2,216,654,598.66
(1) Dividends receivable
1) Classification of dividends receivable
Unit: RMB
Item (or investee) Closing balance Opening balance
Weifang Xingxing United Chemical Co., Ltd. 13,000,000.00
Total 13,000,000.00
(2) Other receivables
1) Other payables by nature
Unit: RMB
Closing book Opening book
Nature balance balance
Open credit 2,675,531,581.63 2,502,722,227.16
Guarantee deposit 11,732,998.24 29,529,247.78
Advances 19,351,237.29
Insurance premium 636,635.53 21,618.27
Reserve and borrowings 43,437,509.57 20,877,056.54
Others 229,207,636.15 126,503,088.52
Total 2,960,546,361.12 2,699,004,475.56
2020 ANNUAL REPORT 215
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VII. Notes to items of the consolidated financial statements (Cont’d)
6. Other receivables (Cont’d)
(2) Other receivables (Cont’d)
2) Particulars of bad debt provision
Unit: RMB
Closing bad debt provision at phase 1:
Expected credit
loss rate (%)
Book for the next Bad debt Carrying
Category balance 12 months provision amount Reason
Bad debt provision assessed individually
Interests receivable
Dividends receivable
Bad debt provision assessed collectively 837,977,005.60 16.78% 140,645,700.07 697,331,305.53
Amount due from government agencies 19,397,119.49 87.75% 17,021,162.41 2,375,957.08
Amount due from related parties 84,783,327.98 22.54% 19,108,203.65 65,675,124.33
Other receivables 733,796,558.13 14.24% 104,516,334.01 629,280,224.12
Total 837,977,005.60 16.78% 140,645,700.07 697,331,305.53
As at the end of the period, the Company did not have interest receivables, dividends receivables and
other receivables in phase 2.
As at the end of the period, closing bad debt provision at phase 3:
Expected credit
loss rate (%)
Book over the Bad debt Carrying
Category balance entire life provision amount Reason
Bad debt provision assessed individually 2,122,569,355.52 18.97% 402,660,101.59 1,719,909,253.93
Total 2,122,569,355.52 18.97% 402,660,101.59 1,719,909,253.93
Changes in carrying book balances with significant changes in loss provision for the year
Applicable √ Not applicable
216 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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VII. Notes to items of the consolidated financial statements (Cont’d)
6. Other receivables (Cont’d)
(2) Other receivables (Cont’d)
2) Particulars of bad debt provision (Cont’d)
Disclosed by ageing
Unit: RMB
Ageing Closing balance Open balance
Within 1 year (including 1 year) 1,356,457,308.62 1,601,285,972.69
1-2 years 813,310,977.70 920,980,164.23
2-3 years 634,042,365.77 82,752,788.66
Over 3 years 156,735,709.03 93,985,549.98
Total 2,960,546,361.12 2,699,004,475.56
3) Provision, recovery or reversal of bad debt provision for the period
Provision of bad debt provision for the period:
Unit: RMB
Changes in the period
Recovery
Category Opening balance Provision or reversal Written off Others Closing balance
Bad debt provision 495,349,876.90 297,534,832.25 249,578,907.49 543,305,801.66
Total 495,349,876.90 297,534,832.25 249,578,907.49 543,305,801.66
2020 ANNUAL REPORT 217
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VII. Notes to items of the consolidated financial statements (Cont’d)
6. Other receivables (Cont’d)
(2) Other receivables (Cont’d)
4) Top five other receivables according to closing balance of debtors
The total amount of the Company’s top five accounts receivable based on closing balance of debtors
for the year was RMB2,404,457,100.41, which accounted for 81.22% of the closing balance of the
total accounts receivable. The closing balance of corresponding bad debt provision amounted to
RMB288,609,478.55.
Unit: RMB
Percentage to
closing balance of Closing balance of
Name of entity Closing balance other receivables bad debt provision
Customer 1 690,000,000.00 23.31% 69,000,000.00
Customer 2 542,000,000.00 18.31% 54,200,000.00
Customer 3 480,000,000.00 16.21% 48,823,536.82
Customer 4 473,402,316.85 15.99% 94,680,463.37
Customer 5 219,054,783.56 7.40% 21,905,478.36
Total 2,404,457,100.41 81.22% 288,609,478.55
7. Inventories
Whether the Company needs to comply with the disclosure requirements for real estate industries
No
(1) Categories of inventories
Unit: RMB
Closing balance Opening balance
Impairment provision Impairment provision
for inventories or for inventories or
Item Book balance performance costs Carrying amount Book balance performance costs Carrying amount
Raw materials 1,712,610,505.63 20,535,018.69 1,692,075,486.94 1,972,197,240.93 21,269,429.01 1,950,927,811.92
Work-in-process products 128,761,554.31 128,761,554.31 81,382,693.49 81,382,693.49
Goods in stock 1,464,455,062.79 1,464,455,062.79 886,102,819.24 886,102,819.24
Consumable biological assets 1,535,386,865.44 1,535,386,865.44 1,541,004,633.42 1,541,004,633.42
Developing products 314,614,378.34 314,614,378.34 315,012,152.74 315,012,152.74
Total 5,155,828,366.51 20,535,018.69 5,135,293,347.82 4,795,699,539.82 21,269,429.01 4,774,430,110.81
218 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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VII. Notes to items of the consolidated financial statements (Cont’d)
7. Inventories (Cont’d)
(2) Impairment provision for inventories or performance costs
Unit: RMB
Increase during the period Decrease during the period
Item Opening balance Provision Others Reversal or transfer Others Closing balance
Raw materials 21,269,429.01 734,410.32 20,535,018.69
Total 21,269,429.01 734,410.32 20,535,018.69
Reversal or transfer during the period
Basis for recognition of net realisable value/ Reason for impairment provision for inventories/
Item residual consideration with future cost performance costs
Raw materials Full amount impairment of spare parts Reversal of impairment provision for inventories for
with long-term storage ageing sale of impaired spare parts during the period
(3) Changes in consumable biological assets
Unit: RMB
Increase during
the period Decrease during the period
Increase Decrease Decrease
Item Opening balance in breeding in fair value in sales Closing balance
Consumable biological assets
measured at fair value 1,541,004,633.42 66,312,515.15 13,329,852.55 58,600,430.58 1,535,386,865.44
Total 1,541,004,633.42 66,312,515.15 13,329,852.55 58,600,430.58 1,535,386,865.44
8. Non-current assets due within one year
Unit: RMB
Item Closing balance Opening balance
Long-term receivables due within one year 4,222,744,207.34 6,974,539,613.30
Total 4,222,744,207.34 6,974,539,613.30
2020 ANNUAL REPORT 219
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VII. Notes to items of the consolidated financial statements (Cont’d)
9. Other current assets
Unit: RMB
Item Closing balance Opening balance
Input tax amount to be deducted 1,041,552,455.22 1,431,298,632.04
Prepaid tax 53,146,519.47 56,778,563.04
Receivables under financial lease due within one year 601,364,577.40 5,229,125,471.51
Factoring receivables due within one year 596,856,928.35 1,008,707,988.47
Prepaid expenses 329,739,882.81 366,080,343.71
Other payments 94,258,332.60
Others 16,716,395.93
Total 2,716,918,695.85 8,108,707,394.70
10. Long-term receivables
(1) Particulars of long-term receivables
Unit: RMB
Closing balance Opening balance
Item Book balance Bad debt provision Carrying amount Book balance Bad debt provision Carrying amount Discount rate range
Finance lease payments 9,963,461,389.49 1,103,339,754.72 8,860,121,634.77 8,144,589,680.94 182,532,601.30 7,962,057,079.64 4%-12%
Less: Unrealised financing income 351,498,895.63 351,498,895.63 462,276,887.88 462,276,887.88
Less: long-term receivables due
within one year 4,624,874,317.67 585,446,099.51 4,039,428,218.16 7,004,375,494.85 159,382,707.55 6,844,992,787.30
Subtotal 4,987,088,176.19 517,893,655.21 4,469,194,520.98 677,937,298.21 23,149,893.75 654,787,404.46
Deposit for finance lease 412,239,088.74 412,239,088.74 734,530,650.26 734,530,650.26
Less: Unrealised financing income 39,232,762.59 39,232,762.59 59,195,417.77 59,195,417.77
Less: non-current assets due within
one year 183,315,989.18 183,315,989.18 129,546,826.00 129,546,826.00
Subtotal 189,690,336.97 189,690,336.97 545,788,406.49 545,788,406.49
Total 5,176,778,513.16 517,893,655.21 4,658,884,857.95 1,223,725,704.70 23,149,893.75 1,200,575,810.95 –
220 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
10. Long-term receivables (Cont’d)
(1) Particulars of long-term receivables (Cont’d)
Particulars of bad debt provision
Unit: RMB
Closing balance Opening balance
Book balance Bad debts provision Book balance Bad debts provision
Expected Expected
credit loss credit loss
Category Amount Percentage Amount rate (%) Carrying amount Amount Percentage Amount rate (%) Carrying amount
Accounts receivable assessed
individually for impairment 4,839,015,749.92 93.48% 516,412,930.95 10.67% 4,322,602,818.97 174,135,402.70 14.23% 20,025,571.31 11.50% 154,109,831.39
Of which:
Financial leasing 4,839,015,749.92 93.48% 516,412,930.95 10.67% 4,322,602,818.97 174,135,402.70 14.23% 20,025,571.31 11.50% 154,109,831.39
Accounts receivable assessed
collectively for impairment 337,762,763.24 6.52% 1,480,724.26 0.44% 336,282,038.98 1,049,590,302.00 85.77% 3,124,322.44 0.30% 1,046,465,979.56
Of which:
Receivables not past due 148,072,426.27 2.86% 1,480,724.26 1.00% 146,591,702.01 503,801,895.51 41.17% 3,124,322.44 0.62% 500,677,573.07
Overdue receivables
Deposits receivable 189,690,336.97 3.66% 189,690,336.97 545,788,406.49 44.60% 545,788,406.49
Total 5,176,778,513.16 100% 517,893,655.21 10.00% 4,658,884,857.95 1,223,725,704.70 100% 23,149,893.75 1.89% 1,200,575,810.95
Accounts receivable assessed collectively for impairment:
Collectively assessed item: receivables from unrelated party customers
Closing balance
Book Bad debt Expected credit
balance provision loss rate (%)
Within 1 year
1 – 2 years 52,304,926.34 523,049.26 1.00%
2 – 3 years 95,767,499.93 957,675.00 1.00%
Total 148,072,426.27 1,480,724.26 1.00%
2020 ANNUAL REPORT 221
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VII. Notes to items of the consolidated financial statements (Cont’d)
10. Long-term receivables (Cont’d)
(1) Particulars of long-term receivables (Cont’d)
Collectively assessed item: Deposits receivable
Closing balance
Book Bad debt Expected credit
balance provision loss rate (%)
Within 1 year 35,500,000.00
1 to 2 years 19,073,080.05
2 to 3 years 100,917,256.92
Over 3 years 34,200,000.00
Total 189,690,336.97
Changes in carrying book balances with significant changes in loss provision for the year
Applicable √ Not applicable
(2) Provision, recovery or reversal of bad debt provision for the period
The bad debt provision for the period amounted to RMB494,743,761.46.
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VII. Notes to items of the consolidated financial statements (Cont’d)
11. Long-term equity investments
Unit: RMB
Change for the period
Investment Adjustment Closing
gain or loss of other Other Distribution of balance of
Opening balance Additional Withdrawn recognised under comprehensive change in cash dividend Impairment Closing balance impairment
Investee (carrying amount) contribution contribution equity method income equity interest or profit declared provision Others (carrying amount) provision
I. Joint venture
Shouguang Chenming Huisen New-style
Construction Materia s Co., Ltd. 3,789,667.61 2,356,074.42 1,200,000.00 4,945,742.03
Weifang Sime Darby West Port Co., Ltd. 89,726,671.76 -7,783,164.84 81,943,506.92
Shouguang Meite Environmental
Technology Co., Ltd. 5,880,000.00 11,916,800.00 -709,607.56 17,087,192.44
Weifang Chenrong New and Old Kinetic
Energy Conversion Equity Investment
Fund Partnership (Lim ted Partnership) 158,000,000.00 42,000,000.00 -294,363.72 199,705,636.28
Weifang Xingxing United Chemical Co.,
Ltd. 93,816,557.39 -1,942,172.27 91,874,385.12
Subtotal 351,212,896.76 53,916,800.00 -8,373,233.97 1,200,000.00 395,556,462.79
II. Associates
Jiangxi Jiangbao Media Colour Printing
Co. Ltd. 0.00
Zhuhai Dechen New Third Board Equity
Investment Fund Company (Lim ted
Partnership 52,412,989.91 -11,330.29 52,401,659.62
Ningbo Kaichen Huamei Equity Investment
Fund Partnership (Lim ted Partnership) 199,528,847.52 -978,921.25 198,549,926.27
Jiangxi Chenming Port Co., Ltd. 1,690,359.66 -379,774.01 1,310,585.65
Chenming (Qingdao) Asset Management
Co., Ltd. 8,669,491.17 5,060.01 8,674,551.18
Goldtrust Futures Co., Ltd. 192,732,957.71 -3,366,026.12 189,366,931.59
Guangdong Nanyue Bank Co., Ltd. 2,800,091,481.01 285,126,660.17 -12,359,143.50 12,560,712.33 3,060,298,285.35
Subtotal 3,255,126,126.98 280,395,668.51 -12,359,143.50 12,560,712.33 3,510,601,939.66
Total 3,606,339,023.74 53,916,800.00 272,022,434.54 -12,359,143.50 13,760,712.33 3,906,158,402.45
12. Other non-current financial assets
Unit: RMB
Item Closing balance Opening balance
Investment in debt instruments 4,000,000.00
Investment in equity instruments 141,910,000.00 147,445,653.55
Total 145,910,000.00 147,445,653.55
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VII. Notes to items of the consolidated financial statements (Cont’d)
13. Investment property
(1) Investment property under the cost method
√ Applicable Not applicable
Unit: RMB
Housing and Construction
Item building structure Land use rights in progress Total
I. Original carrying amount
1. Opening balance 5,433,710,034.39 5,433,710,034.39
2. Increase during the period 1,014,473,350.39 1,014,473,350.39
(1) Purchase 10,709,541.67 10,709,541.67
(2) Transferred from inventories\fixed
assets\construction in progress 286,758,670.97 286,758,670.97
(3) Additions arising from business
combinations 717,005,137.75 717,005,137.75
3. Decrease during the period 1,961,190.00 1,961,190.00
(1) Disposal 1,961,190.00 1,961,190.00
(2) Other transfer
4. Closing balance 6,446,222,194.78 6,446,222,194.78
II. Accumulated depreciation and
accumulated amortisation
1. Opening balance 351,347,741.28 351,347,741.28
2. Increase during the period 152,198,763.17 152,198,763.17
(1) Provision or amortisation 150,933,704.07 150,933,704.07
(2) Additions arising from business
combinations 1,265,059.10 1,265,059.10
3. Decrease during the period 483,877.67 483,877.67
(1) Disposal 483,877.67 483,877.67
(2) Other transfer
4. Closing balance 503,062,626.78 503,062,626.78
III. Provision for impairment
1. Opening balance
2. Decrease during the period
(1) Provision
3. Decrease during the period
(1) Disposal
(2) Other transfer
4. Closing balance
IV.Carrying amount
1. Closing carrying amount 5,943,159,568.00 5,943,159,568.00
2. Opening carrying amount 5,082,362,293.11 5,082,362,293.11
224 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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VII. Notes to items of the consolidated financial statements (Cont’d)
14. Fixed assets
Unit: RMB
Item Closing balance Opening balance
Fixed assets 37,651,706,658.97 34,439,935,032.69
Total 37,651,706,658.97 34,439,935,032.69
(1) Particulars of fixed assets
Unit: RMB
Housing and building Machinery and Electronic equipment
Item structure equipment Vehicles and others Total
I. Original carrying amount:
1. Opening balance 9,941,580,880.78 39,482,080,460.52 351,029,607.21 398,368,057.18 50,173,059,005.69
2. Increase during the period 1,159,957,423.18 4,626,304,659.86 4,810,188.60 59,287,107.33 5,850,359,378.97
(1) Acquisition 89,321,894.44 36,225,041.18 3,469,077.34 50,844,608.77 179,860,621.73
(2) Transferred from
construction in progress 1,024,945,310.08 4,522,259,167.24 793,318.17 5,547,997,795.49
(3) Additions arising from
business combinations 45,690,218.66 67,820,451.44 1,341,111.26 7,649,180.39 122,500,961.75
3. Decrease during the period 460,878,257.31 15,966,928.92 47,223,131.15 1,194,063.10 525,262,380.48
(1) Disposal or retirement 174,119,586.34 15,966,928.92 47,223,131.15 1,194,063.10 238,503,709.51
(2) Transfer to investment
property 286,758,670.97 286,758,670.97
4. Closing balance 10,640,660,046.65 44,092,418,191.46 308,616,664.66 456,461,101.41 55,498,156,004.18
II. Accumulated depreciation
1. Opening balance 1,796,330,000.77 13,297,091,535.53 188,896,834.23 257,770,900.14 15,540,089,270.67
2. Increase during the period 287,122,672.66 1,840,044,300.88 24,266,346.27 19,855,731.97 2,171,289,051.78
(1) Provision 273,654,601.31 1,796,694,649.00 23,311,255.85 15,686,743.12 2,109,347,249.28
(2) Additions arising from
business combinations 13,468,071.35 43,349,651.88 955,090.42 4,168,988.85 61,941,802.50
3. Decrease during the period 27,629,344.79 11,245,005.10 31,125,130.36 863,988.17 70,863,468.42
(1) Disposal or retirement 27,629,344.79 11,245,005.10 31,125,130.36 863,988.17 70,863,468.42
4. Closing balance 2,055,823,328.64 15,125,890,831.31 182,038,050.14 276,762,643.94 17,640,514,854.03
III. Provision for impairment
1. Opening balance 27,808,852.79 157,777,407.54 13,889.13 7,434,552.87 193,034,702.33
2. Increase during the period 13,409,318.95 681.05 13,410,000.00
(1) Provision 13,409,318.95 681.05 13,410,000.00
3. Decrease during the period 510,211.15 510,211.15
(1) Disposal or retirement 510,211.15 510,211.15
4. Closing balance 27,808,852.79 170,676,515.34 13,889.13 7,435,233.92 205,934,491.18
IV. Carrying amount
1. Closing carrying amount 8,557,027,865.22 28,795,850,844.81 126,564,725.39 172,263,223.55 37,651,706,658.97
2. Opening carrying amount 8,117,442,027.22 26,027,211,517.45 162,118,883.85 133,162,604.17 34,439,935,032.69
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VII. Notes to items of the consolidated financial statements (Cont’d)
14. Fixed assets (Cont’d)
(2) Particulars of temporarily idle fixed assets
Unit: RMB
Original carrying Accumulated Provision for
Item amount depreciation impairment Carrying amount Remark
Housing and building
structure 83,342,314.23 23,592,451.29 3,103,215.82 56,646,647.12
Machinery and equipment 1,034,606,835.60 525,012,703.51 165,810,094.18 343,784,037.91
Transportation equipment 12,200.00 10,980.00 1,220.00
Electronic equipment and
others 1,086,525.74 975,604.67 7,868.32 103,052.75
Total 1,119,047,875.57 549,591,739.47 168,921,178.32 400,534,957.78
(3) Particulars of fixed assets without obtaining property right certificates
Unit: RMB
Reason for not yet
obtaining property
Item Carrying amount right certificates
Housing and building structure (Zhanjiang Chenming Pulp
& Paper Co., Ltd.) 1,111,166,398.82 Under application
Housing and building structure (Huanggang Chenming
Pulp & Paper Co., Ltd.) 535,764,603.22 Under application
Housing and building structure (Shouguang Meilun Paper
Co., Ltd.) 455,610,370.30 Under application
Housing and building structure (Jilin Chenming Paper Co.,
Ltd.) 390,201,069.69 Under application
Housing and building structure (Jiangxi Chenming Paper
Co., Ltd.) 211,164,032.89 Under application
Housing and building structure (Shandong Chenming
Paper Holdings Limited) 117,902,833.18 Under application
Housing and building structure (Wuhan Chenming
Hanyang Paper Holdings Co., Ltd.) 79,389,207.27 Under application
Housing and building structure (Chengdu Chenming
Culture Communication Co., Ltd.) 13,289,619.14 Under application
226 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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VII. Notes to items of the consolidated financial statements (Cont’d)
15. Construction in progress
Unit: RMB
Item Closing balance Opening balance
Construction in progress 171,178,595.73 5,467,321,406.80
Materials for project 8,679,346.10 8,801,522.15
Total 179,857,941.83 5,476,122,928.95
(1) Particulars of construction in progress
Unit: RMB
Closing balance Opening balance
Impairment Impairment
Item Book balance provision Carrying amount Book balance provision Carrying amount
High-end cultural paper (Meilun) 179,056,842.38 179,056,842.38
Huanggang Chenming
integrated forestry, pulp and
paper project 4,601,844,646.27 4,601,844,646.27
Biomass power generation
project 193,548,348.79 193,548,348.79
Membrane treatment project
(Zhanjiang Chenming) 25,833,751.07 25,833,751.07
Technological modification
project 59,209,256.24 59,209,256.24 67,088,127.35 67,088,127.35
Upgrading and renovation of
back pressure unit of captive
power plant 263,626,439.57 263,626,439.57
Fly ash cement ceramsite
production project 54,246,139.19 54,246,139.19 51,767,628.00 51,767,628.00
Light calcium carbonate project
(Meilun) 13,836,002.27 13,836,002.27 288,205.15 288,205.15
Others 73,575,656.20 29,688,458.17 43,887,198.03 113,792,158.63 29,524,740.41 84,267,418.22
Total 200,867,053.90 29,688,458.17 171,178,595.73 5,496,846,147.21 29,524,740.41 5,467,321,406.80
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VII. Notes to items of the consolidated financial statements (Cont’d)
15. Construction in progress (Cont’d)
(2) Changes in material construction in progress projects for the period
Unit: RMB
Of which: Capi a i at on
Other capi a i ed rate of t e
Transfer t f xed deduct ons Accumula ed Accumula ed i t rest i t rest
Budget I crease during asset during during t e Closing I vestment Construct on capi a i ed amount during amount f r
Project name ( MB0,000) Opening balance t e period t e period period balance t budget i progress i t rest t e period t e period Source of f nd
Upgrading and r novat on of back pressure uni 27,400.00 263,626,439.57 21,178,256.31 284,804,695.88 0.00 96.95% 100.00 2,652,039.64 1,830,034.66 5.35% Sel -owned f nds
of capt ve power plant ( handong Chenming) and bor owings
New cul u a paper machine ( houguang Mei un) 376,102.00 179,056,842.38 72,431,388.46 251,488,230.84 0.00 95.37% 100.00 Sel -owned f nds
and bor owings
Forest y-pulp-paper pro ect ( uanggang 500,000.00 4,601,844,646.27 121,933,422.99 4,723,778,069.26 0.00 94.80% 100.00 241,118,047.00 17,272,974.15 5.94% Sel -owned f nds
Chenming) and bor owings
Biomass power genera i n pro ect ( uanggang 20,000.00 193,548,348.79 4,419,515.45 197,967,864.24 0.00 98.98% 100.00 Sel -owned f nds
Chenming) and bor owings
Tota 923,502.00 5,238,076,277.01 219,962,583.21 5,458,038,860.22 – – 243,770,086.64 19,103,008.81 11.29% –
(3) Particulars of provision for construction in progress impairment
Unit: RMB
Amount for Reason for
Item the period the provision
Differentiated viscose and spinning and chemical project 126,359.27 Project change
Huanggang Chenming northern district natural gas project 37,358.49 Project change
Total 163,717.76 –
(4) Materials for project
Unit: RMB
Closing balance Opening balance
Impairment Carrying Impairment Carrying
Item Book balance provision amount Book balance provision amount
Special materials 8,679,346.10 8,679,346.10 8,801,522.15 8,801,522.15
Total 8,679,346.10 8,679,346.10 8,801,522.15 8,801,522.15
228 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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VII. Notes to items of the consolidated financial statements (Cont’d)
16. Right-of-use assets
Unit: RMB
Housing and
Item Land use rights building structure Total
I. Original carrying amount
1. Opening balance 163,334,964.90 163,334,964.90
2. Increase during the period 55,766,425.37 5,571,378.54 61,337,803.91
(1) Lease 55,766,425.37 5,571,378.54 61,337,803.91
3. Decrease during the period
4. Closing balance 219,101,390.27 5,571,378.54 224,672,768.81
II. Accumulated depreciation
1. Opening balance 11,193,082.85 11,193,082.85
2. Increase during the period 7,355,907.95 247,058.26 7,602,966.21
(1) Provision 7,355,907.95 247,058.26 7,602,966.21
3. Decrease during the period
4. Closing balance 18,548,990.80 247,058.26 18,796,049.06
III. Provision for impairment
1. Opening balance
2. Increase during the period
3. Decrease during the period
4. Closing balance
IV. Carrying amount
1. Closing carrying amount 200,552,399.47 5,324,320.28 205,876,719.75
2. Opening carrying amount 152,141,882.05 152,141,882.05
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VII. Notes to items of the consolidated financial statements (Cont’d)
17. Intangible assets
(1) Particulars of intangible assets
Unit: RMB
Unpatented Certificates of
Item Land use rights Patents technology Software third party right Total
I. Original carrying amount
1. Opening balance 2,181,863,551.51 20,682,183.44 15,908,674.87 2,218,454,409.82
2. Increase during the period 117,065,481.72 27,358,613.05 891,779.81 145,315,874.58
(1) Acquisition 101,130,000.00 519,053.10 101,649,053.10
(2) Internal research and
development
(3) Additions arising from
business combinations 15,935,481.72 27,358,613.05 372,726.71 43,666,821.48
3. Decrease during the period 107,209,008.00 107,209,008.00
(1) Disposal 107,209,008.00 107,209,008.00
4. Closing balance 2,191,720,025.23 27,358,613.05 21,573,963.25 15,908,674.87 2,256,561,276.40
II. Accumulated amortisation
1. Opening balance 411,294,258.75 19,091,821.06 7,006,425.50 437,392,505.31
2. Increase during the period 46,526,592.72 911,953.77 1,470,131.84 5,298,404.52 54,207,082.85
(1) Provision 43,072,342.03 1,320,348.90 5,298,404.52 49,691,095.45
(2) Business combinations 3,454,250.69 911,953.77 149,782.94 4,515,987.40
3. Decrease during the period 9,662,821.09 9,662,821.09
(1) Disposal 9,662,821.09 9,662,821.09
4. Closing balance 448,158,030.38 911,953.77 20,561,952.90 12,304,830.02 481,936,767.07
III. Impairment provision
1. Opening balance
2. Increase during the period
(1) Provision
3. Decrease during the period
(1) Disposal
4. Closing balance
IV. Carrying amount
1. Closing carrying amount 1,743,561,994.85 26,446,659.28 1,012,010.35 3,603,844.85 1,774,624,509.33
2. Opening carrying amount 1,770,569,292.76 1,590,362.38 8,902,249.37 1,781,061,904.51
Explanation:
(1) For details of restricted ownership, please refer to note VII. 63.
(2) Certificates of third party right refer to enterprise emission rights, with the expiry date ranging between 14 September 2018 and
13 September 2021.
230 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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VII. Notes to items of the consolidated financial statements (Cont’d)
18. Goodwill
(1) Original carrying amount of goodwill
Unit: RMB
Increase during Decrease during
the period the period
Arising from
Name of investee or event Opening business
generating goodwill balance combinations Disposal Closing balance
Shandong Chenming Panels Co.,
Ltd. 5,969,626.57 5,969,626.57
Jilin Chenming Paper Co., Ltd. 14,314,160.60 14,314,160.60
Kunshan Tuoan Plastic Products
Co., Ltd. 26,946,905.38 26,946,905.38
Total 20,283,787.17 26,946,905.38 47,230,692.55
(2) Provision for impairment of goodwill
Unit: RMB
Increase during Decrease during
the period the period
Name of investee or event Opening Closing
generating goodwill balance Provision Disposal balance
Jilin Chenming Paper Co., Ltd. 14,314,160.60 14,314,160.60
Total 14,314,160.60 14,314,160.60
Explanation: The Company assessed the recoverable amount of goodwill and determined that the goodwill related to the Company’s
panel and plastic business was not impaired. With the category of the principal activities as the basis for determining
the reporting segments, the Company regards Shandong Chenming Panels Co., Ltd. and Kunshan Tuoan Plastic
Products Co., Ltd. as two separate asset groups. Their recoverable amount is determined based on the present value
of the estimated future cash flows. Future cash flows are determined based on the financial budget for 2021 to 2025 as
approved by the management, and adopt 7.28% as the discount rate which is the interest rate of the 5-year bonds issued
by the Company in 2018. The cash flows for more than 5 years are calculated based on the growth rate of 5%. Other key
assumptions used in estimating future cash flows include the estimated sales and gross profit based on the performance
of such asset group in the past and the expectation to market development by the management. The management
believes that any reasonable change in the above assumptions will not result in the total book value of the asset group
Shandong Chenming Panels Co., Ltd. and the asset group Kunshan Tuoan Plastic Products Co., Ltd. exceeding its
recoverable amount.
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VII. Notes to items of the consolidated financial statements (Cont’d)
19. Long-term prepaid expenses
Unit: RMB
Amortisation
Opening Increase during during the Other Closing
Item balance the period period deductions balance
Woodland expenses 9,642,224.60 605,796.00 9,036,428.60
Others 38,561,184.11 5,774,110.26 2,310,237.48 42,025,056.89
Total 48,203,408.71 5,774,110.26 2,916,033.48 51,061,485.49
20. Deferred income tax assets/deferred income tax liabilities
(1) Deferred income tax assets before offsetting
Unit: RMB
Closing balance Opening balance
Deductible Deductible
temporary Deferred income temporary Deferred income
Item difference tax assets difference tax assets
Provision for impairment of
assets 2,210,402,262.82 509,732,949.61 1,791,356,735.71 417,688,820.31
Unrealised profit arising from
intra-group transactions 205,628,008.40 51,407,002.10 164,089,227.26 41,022,306.82
Deductible loss 2,445,427,000.05 400,915,339.22 2,243,481,924.83 344,125,106.67
Outstanding payables 538,679,932.17 88,774,034.53 446,580,396.87 68,163,018.91
Deferred income 127,445,713.46 21,358,762.71 116,165,951.14 21,443,378.33
Debt reconstructing 47,906,363.94 11,976,590.97
Total 5,575,489,280.84 1,084,164,679.14 4,761,674,235.81 892,442,631.04
(2) Deferred income tax liabilities before offsetting
Unit: RMB
Closing balance Opening balance
Taxable Deferred Taxable Deferred
temporary income tax temporary income tax
Item differences liabilities differences liabilities
Asset valuation increment
from business combinations
involving entities not under
common control 43,816,906.47 6,572,535.97
Debt reconstructing 5,644,502.36 1,411,125.59
Total 43,816,906.47 6,572,535.97 5,644,502.36 1,411,125.59
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VII. Notes to items of the consolidated financial statements (Cont’d)
20. Deferred income tax assets/deferred income tax liabilities (Cont’d)
(3) The breakdown of unrecognised deferred income tax assets
Unit: RMB
Item Closing balance Opening balance
Deductible temporary difference 59,564,220.72 352,057,221.14
Deductible loss 776,900,858.71 521,737,724.53
Total 836,465,079.43 873,794,945.67
(4) Expiry of deductible loss of unrecognised deferred income tax assets falls in the periods as follows
Unit: RMB
Year Closing amount Opening amount Remark
2020 674,989.71
2021 66,234,527.65 185,647.61
2022 187,801,057.21 11,628,813.14
2023 138,151,854.93 164,859,774.53
2024 108,619,258.72 344,388,499.54
2025 276,094,160.20
Total 776,900,858.71 521,737,724.53 –
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VII. Notes to items of the consolidated financial statements (Cont’d)
21. Other non-current assets
Unit: RMB
Closing balance Opening balance
Impairment Carrying Impairment Carrying
Item Book balance provision amount Book balance provision amount
Prepayments for land
transfer fees 101,130,000.00 101,130,000.00
Prepayments for
engineering and
equipment 58,886,418.75 58,886,418.75 62,945,826.67 62,945,826.67
Prepayments for
properties 9,800,000.00 9,800,000.00
Total 58,886,418.75 58,886,418.75 173,875,826.67 173,875,826.67
22. Short-term borrowings
(1) Classification of short-term borrowings
Unit: RMB
Item Closing balance Opening balance
Mortgage borrowings 279,524,407.05 859,312,833.51
Pledged borrowings 35,075,833.33 180,000,000.00
Guaranteed borrowings 7,536,960,272.39 7,082,088,423.98
Credit borrowings 8,189,875,845.09 7,174,060,275.17
Discounted borrowings 16,752,556,600.00 21,587,694,481.53
Total 32,793,992,957.86 36,883,156,014.19
Explanation of the classification of short-term borrowings:
For classification and amount of mortgage borrowing and mortgage borrowing, please see 1. Monetary funds and 63. Assets
with restricted ownerships or right to use in Note VII;
For classification and amount of pledged borrowing and mortgage borrowing, please see notes in relation, please see 1.
Monetary funds and 63. Assets with restricted ownerships or right to use in Note VII;
Overdue short-term borrowings: total outstanding accounts payable as at the end of the year amounted to RMB0.00.
234 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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VII. Notes to items of the consolidated financial statements (Cont’d)
23. Bills payable
Unit: RMB
Item Closing balance Opening balance
Commercial acceptance bills 984,661,462.19 625,325,798.18
Bank acceptance bills 2,014,275,274.15 889,722,407.82
Total 2,998,936,736.34 1,515,048,206.00
Total outstanding bills payable as at the end of the period amounted to RMB0.00.
24. Accounts payable
(1) Particulars of accounts payable
Unit: RMB
Item Closing balance Opening balance
Loans 3,416,069,031.99 3,393,786,063.51
Payment for engineering 139,679,646.76 408,694,349.00
Payment for equipment 260,995,383.02 312,292,221.48
Others 225,686,670.54 236,314,947.99
Total 4,042,430,732.31 4,351,087,581.98
(2) Significant advance receipts for over 1 year
Unit: RMB
Item Closing balance Reasons
BEIJING GUODIAN FUTONG SCIENCE AND DEVELOPMENT CO., LTD. 46,122,225.40 Quality guarantee
deposit
OMYA HAIMING (NANCHANG) CHEMICAL CO. LTD. 16,000,000.00 Quality guarantee
deposit
CHINA ENERGY ENGINEERING GROUP GUANGZHOU ELECTRIC 14,128,415.00 Quality guarantee
POWER DESIGN INSTITUTE CO., LTD. deposit
ZHEJIANG JNDIA PIPELINE INDUSTRY CO., LTD. 10,556,896.91 Quality guarantee
deposit
GUANGXI CONSTRUCTION ENGINEERING GROUP NO.1 10,551,074.40 Quality guarantee
INSTALLATION CO.,LTD. deposit
Total 97,358,611.71 –-
2020 ANNUAL REPORT 235
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
25. Contract liabilities
Unit: RMB
Item Closing balance Opening balance
Advance loans 1,051,147,044.74 968,082,063.13
Total 1,051,147,044.74 968,082,063.13
26. Staff remuneration payables
(1) Particulars of staff remuneration payables
Unit: RMB
Increase during Decrease during
Item Opening balance the period the period Closing balance
I. Short-term remuneration 189,006,380.72 1,296,897,761.88 1,254,154,559.51 231,749,583.09
II. Retirement benefit plan-defined
contribution scheme 1,223,502.80 166,575,509.35 167,172,009.93 627,002.22
III. Termination benefits 648,217.62 648,217.62
Total 190,229,883.52 1,464,121,488.85 1,421,974,787.06 232,376,585.31
(2) Particulars of short-term remuneration
Unit: RMB
Increase during Decrease during
Item Opening balance the period the period Closing balance
1. Salaries, bonuses, allowance and subsidies 120,634,999.88 1,044,444,322.93 994,436,561.07 170,642,761.74
2. Staff welfare 49,985,551.24 49,985,551.24
3. Social insurance premium 1,871,932.30 81,044,996.18 82,331,320.75 585,607.73
Of which: Medical insurance premium 840,248.82 74,898,536.86 75,163,371.97 575,413.71
Work-related injury insurance
premium 23,069.88 3,288,764.35 3,308,295.63 3,538.60
Maternity insurance premium 1,008,613.60 2,857,694.97 3,859,653.15 6,655.42
4. Housing provident funds 8,856,543.62 95,606,990.68 96,464,622.92 7,998,911.38
5. Union funds and workers’ education 35,831,023.93 25,395,902.46 30,452,086.91 30,774,839.48
6. Other short-term remuneration 21,811,880.99 419,998.39 484,416.62 21,747,462.76
Total 189,006,380.72 1,296,897,761.88 1,254,154,559.51 231,749,583.09
236 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
26. Staff remuneration payables (Cont’d)
(3) Defined contribution plan
Unit: RMB
Increase during Decrease during
Item Opening balance the period the period Closing balance
Basic pension insurance premiums 1,033,762.42 160,480,797.91 160,954,876.73 559,683.60
Unemployment insurance premiums 189,740.38 6,094,711.44 6,217,133.20 67,318.62
Total 1,223,502.80 166,575,509.35 167,172,009.93 627,002.22
27. Taxes payable
Unit: RMB
Item Closing balance Opening balance
Value added tax 294,438,467.26 81,745,671.90
Enterprise income tax 274,637,537.42 166,389,232.03
Individual income tax 41,648,852.90 29,565,363.87
Urban maintenance and construction tax 10,137,043.67 5,844,684.79
Land use tax 7,522,959.20 8,206,677.02
Property tax 9,232,558.17 8,239,300.78
Educational surcharges and others 8,112,168.27 6,850,900.34
Land appreciation tax 2,024,028.20
Environmental Protection Tax 2,263,933.52
Resource tax 255.00
Stamp duty 2,630,037.02 4,712,286.00
Total 652,647,840.63 311,554,116.73
2020 ANNUAL REPORT 237
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
28. Other payables
Unit: RMB
Item Closing balance Opening balance
Interest payable 178,992,959.85 208,189,699.15
Other payables 1,777,722,407.98 2,386,059,927.39
Total 1,956,715,367.83 2,594,249,626.54
(1) Interest payable
Unit: RMB
Item Closing balance Opening balance
Interest on Corporate Bonds 17,401,472.25 103,432,934.98
Interest on borrowings 81,495,654.29 27,960,930.86
Interest on medium-term notes 80,095,833.31 76,795,833.31
Total 178,992,959.85 208,189,699.15
(2) Other payables
1) Other payables by nature
Unit: RMB
Item Closing balance Opening balance
Open credit 625,546,672.65 1,287,822,732.06
Deposit 259,341,777.01 451,756,402.26
Accrued expenses 525,268,287.87 506,095,837.14
The obligation to repurchase shares under the share
incentive scheme 226,860,000.00
Others 140,705,670.45 140,384,955.93
Total 1,777,722,407.98 2,386,059,927.39
238 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
28. Other payables (Cont’d)
(2) Other payables (Cont’d)
2) Significant advance receipts for over 1 year
Unit: RMB
Item Closing balance Reasons
NINE DRAGONS DAWEI HOLDINGS CO., LTD. 30,000,000.00 Deposit
STATE-OWNED SHOUGUANG QINGSHUIPO FARM 8,800,000.00 Open credit
WUHAN TIANRUI PAPER CO., LTD. 7,341,708.00 Deposit
SHOUGUANG LONGYUAN PAPER COATING
CO., LTD. 4,500,000.00 Deposit
NANJING BAIJU RENEWABLE RESOURCES
CO., LTD. 4,020,000.00 Deposit
Total 57,004,704.17
29. Non-current liabilities due within one year
Unit: RMB
Item Closing balance Opening balance
Long-term receivables due within one year 2,935,835,697.30 2,520,582,051.43
Bonds payable due within one year 899,122,500.00
Long-term payables due within one year 1,621,095,530.96 2,238,647,651.02
Lease liabilities due within one year 4,606,717.58 4,606,717.58
Other non-current liabilities due within one year 2,599,411,670.09
Total 7,160,949,615.93 5,662,958,920.03
30. Other current liabilities
Unit: RMB
Item Closing balance Opening balance
Short-term bonds payable 157,037,833.35 222,402,500.00
Total 157,037,833.35 222,402,500.00
2020 ANNUAL REPORT 239
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
30. Other current liabilities (Cont’d)
Increase/decrease in short-term bonds payable:
Unit: RMB
Issue Amortisation Redemption
Name of during Interest at of premium/ during
commercial paper Par value Date of issue Term Amount Opening balance the period par value discount the period Closing balance
2019 fourth tranche of
super & short-term
commercial paper 300,000,000.00 2019-4-30 270 days 299,550,000.00 52,915,000.00 52,915,000.00
2019 fifth tranche of
super & short-term
commercial paper 300,000,000.00 2019-5-24 270 days 299,550,000.00 11,605,000.00 1,627,500.00 50,000.00 13,282,500.00
2019 sixth tranche of
super & short-term
commercial paper 300,000,000.00 2019-7-31 270 days 299,550,000.00 157,882,500.00 4,777,500.00 150,000.00 162,810,000.00
2020 first tranche of
super & short-term
commercial paper 300,000,000.00 2020-4-22 270 days 299,550,000.00 299,550,000.00 12,130,833.35 450,000.00 155,093,000.00 157,037,833.35
Total 1,200,000,000.00 1,198,200,000.00 222,402,500.00 299,550,000.00 18,535,833.35 650,000.00 384,100,500.00 157,037,833.35
31. Long-term borrowings
(1) Types of long-term borrowings
Unit: RMB
Item Closing balance Opening balance
Pledge borrowings 74,823,068.83
Secured borrowings 4,618,249,057.65 5,110,291,847.19
Guarantee borrowings 4,319,737,618.80 5,695,114,793.03
Credit borrowings 2,075,000,000.00 780,692,035.94
Less: long-term borrowings due within 1 year 2,935,835,697.30 2,520,582,051.43
Total 8,077,150,979.15 9,140,339,693.56
Explanation of the classification of long-term borrowings:
For classification and amount of mortgage borrowing and mortgage borrowing, please see 1. Monetary funds and 63. Assets with
restricted ownerships or right to use in Note VII.
For classification and amount of pledged borrowing and mortgage borrowing, please see notes in relation, please see 1. Monetary funds
and 63. Assets with restricted ownerships or right to use in Note VII.
240 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
32. Bonds payable
(1) Bonds payable
Unit: RMB
Item Closing balance Opening balance
17 Chenming Bond 01- Chenming Group 89,957,250.00 89,070,000.00
18 Chenming Bond 01- Chenming Group 350,000,000.00
Chenming USD Bonds 1,096,920,101.46 1,169,200,909.49
Total 1,536,877,351.46 1,258,270,909.49
(2) Increase/decrease in bonds payable (excluding other financial instruments such as Preference Shares and
Perpetual Bonds classified as financial liabilities)
Unit: RMB
Changes
in foreign
Amortisation exchange
Issue during Interest at of premium/ Redemption gains and
Bond name Par value Date of issue Term Amount Opening balance the period par value discount during the period losses Closing balance
17 Chenming
Bond
01-Chenming
Group 1,200,000,000.00 2017/8/22 5 1,198,200,000.00 89,070,000.00 6,552,000.00 887,250.00 6,552,000.00 89,957,250.00
18 Chenming
Bond
01- Chenming
Group 350,000,000.00 2018/4/2 5 350,000,000.00 899,122,500.00 350,000,000.00 25,480,000.00 924,602,500.00 350,000,000.00
Chenming
USD Bonds 1,137,120,600.00 2019/8/6 2.6 1,125,276,863.46 1,169,200,909.49 104,934,612.24 3,588,560.35 104,934,612.24 -75,869,368.38 1,096,920,101.46
Total 2,687,120,600.00 – – 2,673,476,863.46 2,157,393,409.49 350,000,000.00 136,966,612.24 4,475,810.35 1,036,089,112.24 -75,869,368.38 1,536,877,351.46
Less: payable due
within one year 899,122,500.00
Total 2,687,120,600.00 1,258,270,909.49 350,000,000.00 136,966,612.24 4,475,810.35 1,036,089,112.24 -75,869,368.38 1,536,877,351.46
33. Lease liabilities
Unit: RMB
Item Closing balance Opening balance
Lease payments payable 85,933,149.45 90,539,867.03
Less: Unrecognised financing expenses 21,054,661.97 26,236,020.80
Less: Lease liabilities due within one year 4,606,717.58 4,606,717.58
Total 60,271,769.90 59,697,128.65
2020 ANNUAL REPORT 241
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
34. Long-term payables
Unit: RMB
Item Closing balance Opening balance
Long-term payables 2,295,309,357.74 3,321,535,538.94
Total 2,295,309,357.74 3,321,535,538.94
(1) By nature
Unit: RMB
Item Closing balance Opening balance
Retention for the financial leasing operations 64,196,192.92 160,190,103.51
China Development Bank Special funds 517,500,000.00 595,000,000.00
Contributions by other partners 34,210,000.00
Financial leasing 3,300,498,695.78 4,804,993,086.45
Subtotal 3,916,404,888.70 5,560,183,189.96
Less: Long-term payables due within 1 year 1,621,095,530.96 2,238,647,651.02
Total 2,295,309,357.74 3,321,535,538.94
Other explanations:
Contributions by other partners refer to the contributions made by other partners to the Company’s special structured entity, namely
Weifang Chenming Growth Driver Replacement Equity Investment Fund Partnership (Limited Partnership), and such contributions are
reclassified as financial liabilities on a consolidation basis.
35. Provisions
Unit: RMB
Item Closing balance Opening balance Reason
Losses from
Pending litigation 325,259,082.28 325,259,082.28 Arjo’s lawsuit
Total 325,259,082.28 325,259,082.28
Other explanations, including the explanations on significant assumptions and estimation related to significant provision:
In February 2017, Arjowiggins HKK2 Limited (“HKK2 Company”) submitted a H share winding-up petition to Hong Kong High Court due to a
joint venture dispute, which required a compensation for economic loss of RMB167 million and interest thereon, and legal costs of USD3.54
million and arbitration fee of HK$3.3 million and interest thereon to HKK2. The Company made provision of RMB320 million for such pending
litigation in 2017. On 5 August 2020, Hong Kong High Court rejected the Group’s appeal. The Group is seeking ways of appeal again to
safeguard the lawful rights and interests of the Company and the investor community.
242 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
36. Deferred income
Unit: RMB
Increase during Decrease during
Item Opening balance the period the period Closing balance Reason
Government grants 1,771,013,335.11 27,420,000.00 160,436,698.60 1,637,996,636.51 Financial provision
Total 1,771,013,335.11 27,420,000.00 160,436,698.60 1,637,996,636.51
Items in respect of government grants:
Unit: RMB
Include in Amount
New grants non-operating Include in charged
during income for other income against cost Asset-related/
Item Opening balance the period the period for the period expenses Other changes Closing balance income-related
Project fund for
National Key
Technology
Research and
Development
Program 1,452,525.00 0.00 0.00 164,700.00 0.00 0.00 1,287,825.00 Asset-related
Sewage treatment
and water
conservation
transformation
project 63,274,136.71 0.00 0.00 3,673,020.38 0.00 0.00 59,601,116.33 Asset-related
Huanggang
forestry-pulp-
paper project 681,564,072.66 0.00 0.00 28,398,506.40 0.00 0.00 653,165,566.26 Asset-related
Zhanjiang
forestry-pulp-
paper project 67,047,201.50 0.00 0.00 12,145,971.39 0.00 0.00 54,901,230.11 Asset-related
Industrial
logistics park
reconstruction
compensation 51,960,000.00 0.00 0.00 0.00 0.00 51,960,000.00 0.00 Asset-related
Financial subsidies
for technical
transformation
project 168,182,448.80 0.00 0.00 12,496,307.72 0.00 0.00 155,686,141.08 Asset-related
Funding for
environmental
protection 700,228,305.19 27,420,000.00 0.00 50,008,737.63 0.00 0.00 677,639,567.56 Asset-related
Others 37,304,645.25 1,589,455.08 35,715,190.17 Asset-related
Total 1,771,013,335.11 27,420,000.00 0.00 108,476,698.60 0.00 51,960,000.00 1,637,996,636.51
2020 ANNUAL REPORT 243
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VII. Notes to items of the consolidated financial statements (Cont’d)
37. Other non-current liabilities
Unit: RMB
Item Closing balance Opening balance
Medium-term notes 789,521,686.07 3,042,841,328.86
Total 789,521,686.07 3,042,841,328.86
38. Share capital
Unit: RMB
Increase/decrease during the year (+/-)
Shares
converted
Opening balance New issue Bonus issue from reserves Others Subtotal Closing balance
Total number of shares 2,904,608,200.00 79,600,000.00 0.00 0.00 0.00 79,600,000.00 2,984,208,200.00
39. Other equity instruments
(1) Preference Shares, Perpetual Bonds and other financial instruments outstanding at the end of the period
Outstanding Dividend Condition
financial Year of Accounting or interest Issue Maturity date or for
instruments issuance classification rate price Issue size Amount (RMB) renewal status conversion Conversion
17 Lu Chenming Equity No defined Non-
MTN001 2017 instrument 6.80% 100.00 10,000,000.00 1,000,000,000.00 maturity date None convertible
Equity No defined Non-
Chenming You 01 2016 instrument 4.36% 100.00 22,500,000.00 2,250,000,000.00 maturity date None convertible
Equity No defined Non-
Chenming You 02 2016 instrument 5.17% 100.00 10,000,000.00 1,000,000,000.00 maturity date None convertible
Equity No defined Non-
Chenming You 03 2016 instrument 5.17% 100.00 12,500,000.00 1,250,000,000.00 maturity date None convertible
Total 5,500,000,000.00
244 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
39. Other equity instruments (Cont’d)
(2) Changes in Preference Shares, Perpetual Bonds and other financial instruments outstanding at the end of
the period
Unit: RMB
Beginning of the period Increase during the period Decrease during the period End of the period
Outstanding financial
instruments Number Carrying amount Number Carrying amount Number Carrying amount Number Carrying amount
17 Lu Chenming
MTN001 10,000,000.00 996,000,000.00 10,000,000.00 996,000,000.00
17 Lu Chenming
MTN002 20,000,000.00 1,992,000,000.00 20,000,000.00 1,992,000,000.00
Chenming You 01 22,500,000.00 2,238,750,000.00 22,500,000.00 2,238,750,000.00
Chenming You 02 10,000,000.00 999,000,000.00 10,000,000.00 999,000,000.00
Chenming You 03 12,500,000.00 1,239,750,000.00 12,500,000.00 1,239,750,000.00
Total 75,000,000.00 7,465,500,000.00 20,000,000.00 1,992,000,000.00 55,000,000.00 5,473,500,000.00
Changes (increase or decrease) in other equity instruments during the period, the reasons for such changes, and the basis for relevant
accounting treatment:
The Company issued medium-term notes amounting to RMB3,000 million on 12 July and 28 September 2017 at a coupon rate
of 6.80% and 6.30% respectively. The proceeds net of issue costs amounted to RMB2,988.00 million. On 28 September 2020,
The Company exercised the option to redeem medium-term notes amounting to RMB2,000 million.
The notes are debts without a defined maturity date and will continue indefinitely until the exercise of the right of redemption by
the Company. The interest rate of the bills is determined by the basic interest rate + the initial interest rate + 300BP. It has the
feature of capped interest rates and the capped interest rate does not exceed the average interest rate level of the same type
of instruments in the same industry in the same period; The Company has the right to defer any payment of interest. The right
of redemption of the notes is vested in the Company so that it is up to the Company to decide whether to redeem or not; the
priority of repayment of the principal and interest of medium-term notes for the period is the same as other outstanding debt
financing instruments of the issuers in the event of winding up, because there is low probability of bankruptcy that the Company
will not be liable for contractual obligations to deliver cash or other financial assets expected.
Based on the above, the notes do not contain any term giving rise to any contractual obligation to deliver cash or other financial
assets to any other entity, or to exchange any financial asset or financial liability with any other entity under potential adverse
circumstances. Consequently, they are eligible to be recognised and accounted for as equity instruments and included under
other equity instruments.
The Company non-publicly issued Preference Shares amounting to RMB4,500 million on 17 March, 17 August and 22 September
2016 respectively. The proceeds net of issue costs amounted to RMB4,477.50 million.
2020 ANNUAL REPORT 245
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
39. Other equity instruments (Cont’d)
(2) Changes in Preference Shares, Perpetual Bonds and other financial instruments outstanding at the end of
the period (Cont’d)
Holders of Preference Shares participate in profit distribution in two portions, namely the fixed dividend distributed based on a fixed
dividend rate and the distribution of retained earnings realised for the year.
Distribution of fixed dividend
According to the Articles of Association, the Company shall distribute fixed dividends to holders of the Preference Shares at fixed
dividend rate if there are distributable profits after making good losses and the contribution to reserve fund according to law. The
Board is authorised by the general meeting to declare and pay all dividends on the Preference Shares in accordance with the issuance
plan under the framework and principles considered and approved in the general meeting in respect of the Preference Shares. The
general meeting of the Company has the right to cancel part of or all of the current dividends on the Preference Shares. However, when
the general meeting of the Company considers the cancellation of part of or all of the current dividends on the Preference Shares,
the Company shall inform the shareholders of Preference Shares at least 10 working days before the date of dividend payment in
accordance with the requirements of the related authorities.
Participation in the distribution of retained earnings realised for the year
Holders of Preference Shares participate in the distribution of the retained earnings through receipt of cash which is non-cumulative
and non-deferrable. In the event of making good losses and the contribution to reserve fund according to law, after receiving fixed
dividends at fixed dividend rate as agreed, holders of Preference Shares can also participate in the distribution of the retained earnings
for the year in proportion. Specific terms are as follows: the retained earnings for the year arises from net profit attributable to owners
of the parent company on a consolidated basis upon distribution of relevant fixed income to holders of financial instruments such as
the Preference Shares which may be classified under equity. 50% of the retained earnings shall be distributed to holders of Preference
Shares and ordinary shareholders. Holders of Preference Shares shall participate in the distribution of the retained earnings by receiving
cash dividends, and the ordinary shareholders shall participate in the distribution of the retained earnings by receiving cash dividends or
dividends on ordinary shares.
Based on the above, the Preference Shares do not contain any term giving rise to any contractual obligation to deliver cash or other
financial assets to any other entity, or to exchange any financial asset or financial liability with any other entity under potential adverse
circumstances. Consequently, they were accounted for as other equity instruments – Preference Shares.
246 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
40. Capital reserves
Unit: RMB
Increase during Decrease during
Item Opening balance the period the period Closing balance
Capital premium
(share premium) 4,416,363,920.09 215,164,804.37 12,426,743.15 4,619,101,981.31
Other capital reserves 670,322,507.21 32,486,925.23 702,809,432.44
Total 5,086,686,427.30 247,651,729.60 12,426,743.15 5,321,911,413.75
Other explanations, including changes (increase or decrease) during the period and reasons for such changes: During the year,
the Group implemented a share incentive scheme and issued additional restricted shares to its participants with an increase of capital
reserves of RMB146,264,104.00;
the Group recognised the management fees during the vesting period for the share-based payments with an increase of capital reserves
of RMB32,486,925.23;
the Group repaid equity-settled Perpetual Bonds with a decrease of capital reserves of RMB8,000,000.00;
a capital increase of Shouguang Meilun Paper Co., Ltd., a subsidiary of the Group, was contributed on the part of another
investor, which causing a decrease in the Company’s shareholding without a loss of control, and an increase of capital reserves of
RMB44,819,271.77;
the Group acquired the non-controlling interests of a subsidiary, Wuhan Chenming Hanyang Paper Holdings Co., Ltd. with a decrease
of capital reserves of RMB4,426,743.15;
the Group acquired the non-controlling interests of a subsidiary, Jiangxi Chenming Paper Co., Ltd. with an increase of capital reserves
of RMB24,081,428.60.
41. Treasury shares
Unit: RMB
Increase during Decrease during
Item Opening balance the period the period Closing balance
Share incentive 0.00 226,860,000.00 0.00 226,860,000.00
Total 0.00 226,860,000.00 0.00 226,860,000.00
Other explanations, including changes (increase or decrease) during the period and reasons for such changes:
During the year, the Company issued additional 79,600,000 A shares by implementing the share incentive scheme and recognised treasury
shares for the obligation to repurchase.
2020 ANNUAL REPORT 247
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VII. Notes to items of the consolidated financial statements (Cont’d)
42. Other comprehensive income
Unit: RMB
During the period
Less: Transferred
Less: Transferred from other
from other comprehensive
comprehensive income in prior
Incurred income in prior periods to Attributable to
before periods to retained Less: Attributable to minority
income tax profit or loss earnings Income tax parent company shareholders
Item Opening balance for the period during the period during the period expenses after tax after tax Closing balance
I. Other comprehensive income
that cannot be reclassified to
profit or loss in subsequent
periods
II. Other comprehensive income
that will be reclassified to
profit and loss in subsequent
periods -879,452,135.10 317,765,527.44 317,765,527.44 -561,686,607.66
Including: Other
comprehensive
income that may
be reclassified
to profit and loss
under the equity
method -12,359,143.50 -12,359,143.50 -12,359,143.50
Translation differences
of financial statements
denominated in foreign
currency -879,452,135.10 330,124,670.94 330,124,670.94 -549,327,464.16
Total other comprehensive
income -879,452,135.10 317,765,527.44 317,765,527.44 -561,686,607.66
43. Surplus reserves
Unit: RMB
Increase during Decrease during
Item Opening balance the period the period Closing balance
Statutory surplus reserves 1,212,009,109.97 1,212,009,109.97
Total 1,212,009,109.97 1,212,009,109.97
248 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
44. General risk reserves
Unit: RMB
Decrease during
Item Closing balance Opening balance the period Closing balance
General risk reserves 74,122,644.20 74,122,644.20
Total 74,122,644.20 74,122,644.20
45. Retained profit
Unit: RMB
Item The period The prior period
Retained profit as at the end of the prior year before adjustment 9,306,269,617.38 9,107,422,690.85
Retained profit as at the beginning of the year after adjustment 9,306,269,617.38 9,107,422,690.85
Plus: Net profit for year attributable to shareholders of the parent
company 1,712,029,078.52 1,656,566,584.88
Less: Transfer of statutory surplus reserves 63,120,197.86
Transfer of general risk reserves 9,998,724.97
Ordinary dividend payable 437,433,593.74 697,105,968.00
Perpetual Bonds interest payable 194,000,000.00 194,000,000.00
Preferred shares interest payable 387,101,073.42 493,494,767.52
Ordinary dividend converted into share capital
Retained profit as at the end of the period 9,999,764,028.74 9,306,269,617.38
46. Revenue and operating costs
Unit: RMB
Amount for the year Amount for the prior year
Item Revenue Operating costs Revenue Operating costs
Principal activities 30,047,258,084.97 23,046,708,818.72 29,591,962,733.76 22,182,591,005.20
Other activities 689,259,911.93 598,885,367.49 803,471,339.59 567,678,744.18
Total 30,736,517,996.90 23,645,594,186.21 30,395,434,073.35 22,750,269,749.38
Whether the lower of the audited net profit before or after deducting extraordinary gains or losses is a negative
number
Yes √ No
2020 ANNUAL REPORT 249
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VII. Notes to items of the consolidated financial statements (Cont’d)
46. Revenue and operating costs (Cont’d)
Information related to revenue:
Unit: RMB
Machine-made Financial
Category of contract paper segment segment Real estate Others Total
Type of goods 29,021,523,071.50 964,291,738.17 106,560,951.52 644,142,235.71 30,736,517,996.90
Including:
Machine-made paper 26,799,197,492.54 26,799,197,492.54
Financial leasing 935,121,026.20 935,121,026.20
Electricity and steam 195,367,954.91 195,367,954.91
Construction materials 419,138,839.41 419,138,839.41
Paper chemicals 144,274,657.39 144,274,657.39
Others 1,882,682,966.66 29,170,711.97 106,560,951.52 225,003,396.30 2,243,418,026.45
By geographical area 29,021,523,071.50 964,291,738.17 106,560,951.52 644,142,235.71 30,736,517,996.90
Including:
Domestic 25,968,365,122.36 964,291,738.17 106,560,951.52 644,142,235.71 27,683,360,047.76
Overseas 3,053,157,949.14 3,053,157,949.14
By the timing of delivery 29,021,523,071.50 999,978,255.73 70,874,433.96 644,142,235.71 30,736,517,996.90
Including:
Goods (at a point in time) 29,011,763,488.80 641,375,975.70 29,653,139,464.50
Services (within a certain
period) 9,759,582.70 999,978,255.73 70,874,433.96 2,766,260.01 1,083,378,532.40
Breakdown of revenue from principal activities
By industry
Amount for the year Amount for the prior year
Name of industry Revenue Costs Revenue Costs
Machine-made paper 26,799,197,492.54 21,227,455,753.49 25,911,568,864.47 20,423,499,344.65
Financial leasing 935,121,026.20 127,620,095.42 1,815,459,714.28 119,934,602.87
Paper chemicals 144,274,657.39 124,475,985.43 126,550,115.28 112,807,283.45
Electricity and steam 195,367,954.91 130,435,496.35 143,725,243.14 114,507,240.78
Construction materials 419,138,839.41 358,729,667.72 311,264,909.38 254,581,603.21
Others 2,243,418,026.46 1,676,877,187.80 2,086,865,226.79 1,724,939,674.42
Total 30,736,517,996.91 23,645,594,186.21 30,395,434,073.35 22,750,269,749.38
250 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
46. Revenue and operating costs (Cont’d)
Machine-made paper, by main product type
Amount for the year Amount for the prior year
Name of industry Revenue Costs Revenue Costs
White paper board 7,900,414,595.22 5,764,493,788.34 6,908,899,578.15 6,047,977,623.29
Duplex press paper 6,880,399,009.21 5,658,261,879.44 7,728,877,039.07 6,009,833,104.71
Coated paper 4,134,523,188.76 3,253,634,912.22 3,779,487,348.44 2,875,206,350.48
Electrostatic paper 4,052,403,877.82 3,196,464,794.41 3,270,064,358.54 2,416,568,414.13
Anti-sticking raw paper 1,118,932,774.91 868,748,128.10 1,238,578,315.18 888,415,814.55
Household paper 531,378,922.70 502,581,030.04 620,993,038.46 534,388,532.97
Others 2,181,145,123.92 1,983,271,220.94 2,364,669,186.63 1,651,109,504.52
Total 26,799,197,492.54 21,227,455,753.49 25,911,568,864.47 20,423,499,344.65
Machine-made paper, by geographical segment
Amount for the year Amount for the prior year
Name of industry Revenue Costs Revenue Costs
Mainland China 27,683,360,047.76 21,069,825,079.51 26,788,134,394.76 19,471,104,162.68
Other countries and regions 3,053,157,949.14 2,575,769,106.70 3,607,299,678.59 3,279,165,586.70
Total 30,736,517,996.90 23,645,594,186.21 30,395,434,073.35 22,750,269,749.38
Revenue from top 5 customers
Total revenue from Percentage of the total revenue
Period top 5 customers in the same period (%)
2020 4,206,250,003.00 13.68%
2019 3,193,575,635.94 10.51%
2020 ANNUAL REPORT 251
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VII. Notes to items of the consolidated financial statements (Cont’d)
47. Taxes and surcharges
Unit: RMB
Amount for Amount for
Item the period the prior period
Urban maintenance and construction tax 52,280,034.26 68,851,026.86
Educational surcharges 22,418,855.28 30,207,914.38
Resource tax 10,367,209.74 11,038,459.80
Property tax 68,375,017.95 70,397,206.93
Land use tax 29,847,867.46 34,686,247.44
Vehicle and vessel tax 125,784.05 112,050.62
Stamp duty 31,389,172.39 26,151,364.68
Local education surcharges 9,679,449.17 18,602,695.08
Water engineering funds 2,683,161.08 2,576,414.28
Land appreciation tax 2,681,494.52 701,320.66
Others 20,680,809.50 12,608,739.08
Total 250,528,855.40 275,933,439.81
48. Selling and distribution expenses
Unit: RMB
Amount for Amount for
Item the period the prior period
Wages 122,235,622.89 143,945,947.37
Depreciation expenses 12,008,055.46 12,421,773.86
Office expenses 3,071,737.33 4,737,474.20
Travel expenses 18,618,459.51 31,547,133.82
Selling commissions 27,552,636.35 8,642,790.19
Rental expenses 6,714,594.29 10,481,463.36
Hospitality expenses 55,229,939.72 66,310,236.64
Warehouse expenses 1,108,765.35 7,548,664.33
Others 51,706,545.01 35,175,241.08
Total 298,246,355.91 320,810,724.85
252 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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VII. Notes to items of the consolidated financial statements (Cont’d)
49. General and administrative expenses
Unit: RMB
Amount for Amount for
Item the period the prior period
Wages and surcharges 320,742,683.51 336,234,528.59
Welfare expenses 64,686,363.40 51,837,962.58
Depreciation expenses 153,853,014.06 146,845,808.97
Amortisation of intangible assets and long-term expenses 44,383,804.21 48,927,936.41
Production interruption loss 94,624,006.41 146,340,924.01
Repair cost and consumption of materials 23,829,844.68 49,131,088.84
Audit fees 5,668,334.66 6,131,215.01
Travel expenses 16,069,151.86 23,656,024.87
Business hospitality expenses 87,331,837.47 101,735,867.20
Waste disposal expenses 9,862,736.52 8,621,732.91
Insurance premium 29,822,263.59 27,737,182.97
Office expenses 3,759,121.11 13,277,878.29
Others 170,787,498.91 174,247,241.19
Total 1,025,420,660.39 1,134,725,391.84
50. R&D expenses
Unit: RMB
Amount for Amount for
Item the period the prior period
Installation expenses 1,885,550.14 880,370.71
Depreciation expenses 62,483,794.25 47,736,244.65
Consumption of materials 875,193,790.53 656,418,640.23
Travel expenses 25,245.51 163,071.13
Wages and surcharges 148,290,430.65 136,792,729.52
Welfare expenses 4,551,325.39 3,484,889.21
Housing provident funds 9,489,172.29 4,647,016.68
Insurance premium 20,343,290.79 12,437,428.25
Union funds 779,789.00 104,485.65
Utilities 147,453,048.82 126,993,184.82
Other expenses 3,859,804.12 2,654,895.89
Total 1,274,355,241.49 992,312,956.74
2020 ANNUAL REPORT 253
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VII. Notes to items of the consolidated financial statements (Cont’d)
51. Finance expenses
Unit: RMB
Amount for Amount for
Item the period the prior period
Interest expenses 3,144,464,077.81 3,780,373,270.56
Less: capitalised interest amount 19,103,008.81 206,508,056.70
interest income 887,004,185.02 836,491,207.55
Foreign exchange gains and losses -27,516,846.19 -78,262,003.10
Bank charges and others 351,225,025.43 256,917,151.16
Total 2,562,065,063.22 2,916,029,154.37
52. Other income
Unit: RMB
Amount for Amount for
Source of other income the period the prior period
Government grants – amortised deferred income included in profit or loss 108,476,698.60 91,384,862.50
Government grants – directly included in profit or loss 255,407,429.72 470,171,768.01
Total 363,884,128.32 561,556,630.51
53. Investment income
Unit: RMB
Amount for Amount for
Item the period the prior period
Income from long-term equity investments accounted for using the
equity method 272,022,434.54 -2,995,932.01
Investment gain on disposal of long-term equity investments 16,778,042.01 176,212,409.13
Investment gain on disposal of other non-current financial assets 784,345.77
Gains or losses on credit assignment -93,431,738.91
Investment gain debt reconstructuring -22,005,200.15
Total 173,363,537.49 174,000,822.89
254 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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VII. Notes to items of the consolidated financial statements (Cont’d)
54. Gain on change in fair value
Unit: RMB
Amount for Amount for
Source of gain on change in fair value the period the prior period
Financial assets held for trading 10,126,787.86
Other non-current financial assets 9,464,346.45 46,445,653.55
Gain on change in fair value of consumable biological assets measured
at fair value -13,329,852.55 -19,752,911.94
Total 6,261,281.76 26,692,741.61
55. Credit impairment loss
Unit: RMB
Amount for Amount for
Item the period the prior period
Bad debt loss of other receivables -47,955,924.76 -280,868,224.23
Bad debt loss of other payments -16,633,823.40
Bad debt loss of bills receivable 63,022,468.83 -173,401,791.27
Loss on debt restructuring impairment -55,792,548.82
Bad debt loss of financial lease payments -650,157,592.24 -523,805,364.41
Total -651,724,871.57 -1,033,867,928.73
56. Loss on impairment of assets
Unit: RMB
Amount for Amount for
Item the period the prior period
Loss on inventory impairment and impairment loss of performance
costs of contracts 61,394,424.83
Loss on long-term equity investments impairment -5,994,545.96
Loss on fixed asset impairment -13,410,000.00 -170,552,917.47
Loss on construction in progress impairment -163,717.76 -5,838,644.59
Total -13,573,717.76 -120,991,683.19
2020 ANNUAL REPORT 255
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VII. Notes to items of the consolidated financial statements (Cont’d)
57. Asset disposal income
Unit: RMB
Amount for Amount for the
Source of asset disposal income the period prior period
Gain on disposal of fixed assets (“-” denotes loss) 17,450,629.19 -29,073,731.05
Gain on disposal of intangible assets (“-” denotes loss) 8,752,868.37
Total 26,203,497.56 -29,073,731.05
58. Non-operating income
Unit: RMB
Amount included in
extraordinary gains
Amount for Amount for or losses for
Item the period the prior period the period
government subsidy 577,140,958.93 86,353,174.56 577,140,958.93
Non-current assets damage and scrap profits 879,060.70 1,360,844.76 879,060.70
Unpaid debt 7,086,812.20 9,170,357.94 7,086,812.20
Fine income 1,811,183.88 3,244,945.04 1,811,183.88
Adjustment in equity book value 364,597,001.77
Others 13,547,672.44 28,667,590.80 13,547,672.44
Total 600,465,688.15 493,393,914.87 600,465,688.15
Government grants included in profit or loss for the period:
Unit: RMB
Amount for Amount for the Asset-related/
Grants item the period prior period income-related
Grant income 43,750,958.93 44,810,674.56 Income-related
Relocation subsidy 533,390,000.00 Income-related
Inviting investments 41,542,500.00 Income-related
Total 577,140,958.93 86,353,174.56
256 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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VII. Notes to items of the consolidated financial statements (Cont’d)
59. Non-operating expenses
Unit: RMB
Amounts included in
extraordinary gains
Amount for Amount for the or losses for
Item the period prior period the period
Donation 8,922,077.88 11,947,836.00 8,922,077.88
Loss on disposal of non-current assets 2,178,029.29 12,610,269.22 2,178,029.29
Others 1,817,128.52 4,026,488.78 1,817,128.52
Total 12,917,235.69 28,584,594.00 12,917,235.69
60. Income tax expenses
(1) Particulars of income tax expenses
Unit: RMB
Amount for Amount for the
Item the period prior period
Income tax expenses for the period 457,778,696.15 564,800,047.60
Deferred income tax expenses -191,722,048.10 -269,619,411.14
Total 266,056,648.05 295,180,636.46
(2) The reconciliation between accounting profit and income tax expenses
Unit: RMB
Item Amount for the period
Total profit 2,172,269,942.54
Income tax expenses calculated at statutory/applicable tax rates 325,840,491.38
Effect of different tax rates applicable to subsidiaries -33,940,524.87
Effect of adjustments for income tax for prior periods 26,378,994.07
Effect of income not subject to tax -199,768,992.13
Non-deductible costs, expenses and losses 35,054,244.88
Effect of utilisation of previously unrecognised deductible loss on deferred income tax
assets -15,434,485.73
Effect of current unrecognised deductible temporary difference or deductible loss
arising from deferred tax income assets 268,062,142.88
Profit and loss of joint ventures and associates accounted for using the equity method 40,803,365.18
The effect of tax rate changes on the opening balance of deferred income tax -14,899,281.39
Tax effect of R & D fee deduction (listed with “-”) -136,939,306.22
The pre-tax deduction of the interest on Perpetual Bonds accounted as equity -29,100,000.00
Income tax expense 266,056,648.05
2020 ANNUAL REPORT 257
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
61. Items on statements of cash flow
(1) Cash received relating to other operating activities
Unit: RMB
Amount for Amount for the
Item the period prior period
Default penalty and fine 21,312,403.81 31,483,669.33
Finance expenses – Interest income 380,426,195.87 301,405,794.11
Income-related government grants 792,045,853.85 502,905,296.95
Open credit and other income 200,271,888.17 228,147,969.26
Net proceedings from the financial leasing business 3,562,339,444.74 5,885,287,081.31
Total 4,956,395,786.44 6,949,229,810.96
(2) Cash paid relating to other operating activities
Unit: RMB
Amount for Amount for the
Item the period prior period
Financial institutions charge 244,065,319.39 249,130,994.84
Business hospitality expenses 114,049,421.75 134,787,611.84
Travel expenses 34,480,991.74 55,277,692.76
Office expenses 25,301,574.10 21,976,874.36
Transportation expenses 1,098,519,658.39 1,035,450,908.40
Leasing expenses 11,613,158.79 14,283,881.89
Waste disposal expenses 18,878,944.13 18,686,112.18
Insurance premium 30,058,435.52 19,412,563.18
Repair expenses 30,764,539.64 54,630,753.25
Cargo handling charges 36,441,851.25 37,988,391.76
Intermediary service expenses 49,981,129.73 43,965,039.03
Donation 8,922,077.88 11,947,836.00
Others 131,699,592.31 105,542,724.58
Total 1,834,776,694.62 1,803,081,384.07
258 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
61. Items on statements of cash flow (Cont’d)
(3) Cash received relating to other investing activities
Unit: RMB
Amount for Amount for the
Item the period prior period
Recovery of consideration for equity transfer 409,282,077.65 767,670,000.00
Total 409,282,077.65 767,670,000.00
(4) Cash paid relating to other investing activities
Unit: RMB
Amount for Amount for the
Item the period prior period
Prepayments for land 101,130,000.00
Total 101,130,000.00
(5) Cash received relating to other financing activities
Unit: RMB
Amount for Amount for the
Item the period prior period
Short-term commercial paper 814,457,000.00 3,081,090,437.86
Equipment leaseback 900,000,000.00 1,717,600,000.00
Deposit for finance lease 362,299,603.12
Financial support from shareholders 332,440,865.27
Net recovery of guarantee deposit 3,153,589,473.80 734,974,699.49
Total 5,230,346,076.92 5,866,106,002.62
2020 ANNUAL REPORT 259
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VII. Notes to items of the consolidated financial statements (Cont’d)
61. Items on statements of cash flow (Cont’d)
(6) Cash paid relating to other financing activities
Unit: RMB
Amount for Amount for the
Item the period prior period
Repayment of short-term commercial paper and MTN 2,190,000,000.00 5,070,000,000.00
Repayment of bonds 900,000,000.00 1,182,150,000.00
Repayment of equipment leaseback 2,568,988,488.34 3,155,141,094.22
Payment of Preference Shares dividend 387,101,073.42 493,494,767.52
Payment of Perpetual Bonds interest 194,000,000.00 194,000,000.00
Repayment of financial support from shareholders 708,440,900.00
Security deposit for financial leasing 35,500,000.00 15,000,000.00
Payment of equity in China Development Bank funds 77,500,000.00
Acquisition of non-controlling interests 450,000,000.00
Total 7,511,530,461.76 10,109,785,861.74
260 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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VII. Notes to items of the consolidated financial statements (Cont’d)
62. Supplementary information on cash flow statement
(1) Supplementary information on cash flow statement
Unit: RMB
Amount for Amount for the
Supplementary information the period prior period
1. Reconciliation of net profit as cash flows from operating activities: – –
Net profit 1,906,213,294.49 1,753,298,192.81
Plus: Provision for impairment of assets 665,298,589.33 1,154,859,611.92
Depreciation of fixed assets, consumption of oil and gas assets,
depreciation of bearer biological assets 2,267,883,919.56 1,853,139,090.52
Depreciation of right-of-use assets
Amortisation of intangible assets 49,691,095.45 53,100,846.01
Amortisation of long-term prepaid expenses 2,916,033.48 7,433,030.41
Loss on disposal of fixed assets, intangible assets and other long-term
assets (“-” denotes gain) 1,298,968.59 30,173,140.18
Loss on scrapped fixed assets (“-” denotes gain) -26,203,497.56 1,361,320.41
Loss on changes in fair value (“-” denotes gain) -6,261,281.76 -26,692,741.61
Finance expenses (“-” denotes gain) 2,139,908,266.82 3,073,865,213.86
Investment loss (“-” denotes gain) -173,363,537.49 -538,597,824.66
Decrease in deferred income tax assets (“-” denotes increase) -191,722,048.10 -288,568,932.42
Increase in deferred income tax liabilities (“-” denotes decrease) 5,161,410.38 1,411,125.59
Decrease in inventories (“-” denotes increase) -360,128,826.69 2,122,985,295.71
Decrease in operating receivables (“-” denotes increase) 5,956,184,790.79 7,690,318,930.21
Increase in operating payables (“-” denotes decrease) -977,074,501.01 -4,655,379,076.00
Others
Net cash flows from operating activities 11,259,802,676.28 12,232,707,222.94
2. Major investing and financing activities not involving cash settlements: – –
Capital converted from debts
Convertible bonds of the Company due within one year
Finance leases of fixed assets
3. Net change in cash and cash equivalents: – –
Closing balance of cash 4,389,169,963.79 2,890,328,027.41
Less: Opening balance of cash 2,890,328,027.41 2,381,558,242.52
Plus: Closing balance of cash equivalents
Less: Opening balance of cash equivalents
Net increase in cash and cash equivalents 1,498,841,936.38 508,769,784.89
2020 ANNUAL REPORT 261
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VII. Notes to items of the consolidated financial statements (Cont’d)
62. Supplementary information on cash flow statement (Cont’d)
(2) Net cash received from disposal of subsidiaries during the current period
Unit: RMB
Amount
Cash or cash equivalents received from disposal of subsidiaries during the period 16,100,000.00
Of which: –
Shouguang Chenming Industrial Logistics Co., Ltd. 7,100,000.00
Qingdao Chenming International Logistics Co., Ltd. 9,000,000.00
Less: Cash and cash equivalents held by the company on the date in the event that the
control is lost 262,330.85
Of which: –
Shouguang Chenming Industrial Logistics Co., Ltd. 259,575.02
Qingdao Chenming International Logistics Co., Ltd. 2,755.83
Plus: Cash or cash equivalents received from disposal of subsidiaries during previous
periods 201,710,000.00
Of which: –
Haicheng Haiming Mining Co., Ltd. 200,000,000.00
Wuxi Songling Paper Co., Ltd. 1,710,000.00
Net cash received from disposal of subsidiaries 217,547,669.15
(3) Cash and cash equivalents composition
Unit: RMB
Item Closing balance Opening balance
I. Cash 4,389,169,963.79 2,890,328,027.41
Of which: Treasury cash 2,161,684.57 2,418,131.86
Bank deposit that can be used for payment at any time 4,387,008,279.22 2,887,909,895.55
Other monetary funds that can be used for payment at any time
Deposit at central bank deposit that can be used for payment
Amount due from banks
Amount due to banks
II. Cash equivalents
Of which: Bond investment with maturity within 3 months
III. Balance of cash and cash equivalent at end of period 4,389,169,963.79 2,890,328,027.41
Of which: Restricted cash and cash equivalents used by the
Company or subsidiaries within the Group
262 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
63. Assets with restricted ownerships or right to use
Unit: RMB
Item Closing carrying amount Reason for such restrictions
Monetary funds 13,022,652,331.98 As guarantee deposits for bank acceptance bills
and letter of credit and deposit reserves
Financial instruments held for trading 96,453,900.31 As deposits for borrowings from Haitong
International Securities
Fixed assets 11,147,836,807.04 As collateral for bank borrowings and long-term
payables
Intangible assets 1,247,015,765.23 As collateral for bank borrowings and long-term
payables
Accounts receivable financing 5,555,551.65 As collateral for letters of guarantee and letters of
credit
Investment property 4,929,794,589.62 As collateral for bank borrowings
Total 30,449,308,945.83 –
Other explanation:
As at 31 December 2020, 50% of the carrying amount of the financial assets held for trading were pledged as collateral for short-term
borrowings amounting to RMB91,317,302.08, housing, building structure and equipment with the carrying amount of RMB11,147,836,807.04
(31 December 2019: carrying amount of RMB10,573,696,190.50) were pledged as collateral for intangible assets with the carrying amount of
RMB1,247,015,765.23 (31 December 2019: carrying amount of RMB880,676,428.58), and investment properties with the carrying amount of
RMB4,929,794,589.62 (31 December 2019: carrying amount of RMB4,519,487,976.25) was pledged as collateral for long-term borrowings with
the carrying amount of RMB4,618,249,057.65 (31 December 2019: carrying amount of RMB5,110,291,847.19) and short-term borrowings with
the carrying amount of RMB35,075,833.33 (31 December 2019: carrying amount of RMB180,000,000.00).
2020 ANNUAL REPORT 263
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VII. Notes to items of the consolidated financial statements (Cont’d)
64. Foreign currency items
(1) Foreign currency items
Unit: RMB
Closing foreign Closing balance
Item currency balance Exchange rate in RMB
Monetary funds – – 260,827,412.73
Of which: USD 37,907,361.33 6.5249 247,341,741.93
EUR 1,307,111.72 8.0250 10,489,571.54
HKD 3,504,687.95 0.8416 2,949,685.57
JPY 396.93 0.0632 25.10
GBP 5,217.89 8.8903 46,388.59
Accounts receivables – – 124,901,686.09
Of which: USD 14,186,526.37 6.5249 92,565,665.92
EUR 2,931,746.89 8.0250 23,527,268.79
HKD
JPY 139,299,629.64 0.0632 8,808,751.38
Long-term borrowings – – 1,273,181,079.15
Of which: USD 195,126,527.48 6.5249 1,273,181,079.15
Non-current liabilities due within one year 1,857,654,097.30
Of which: USD 284,702,309.20 6.5249 1,857,654,097.30
Accounts payable – – 282,733,309.14
Of which: USD 39,704,203.29 6.5249 259,065,956.03
EUR 2,949,202.88 8.0250 23,667,353.11
Bonds payable – – 1,096,920,101.46
Of which: USD 168,112,936.82 6.5249 1,096,920,101.46
Short-term borrowings – – 1,277,882,459.09
Of which: USD 181,851,853.21 6.5249 1,186,565,157.01
HKD 108,499,242.05 0.8416 91,317,302.08
Other receivables – – 9,262,356.02
Of which: USD 1,161,607.35 6.5249 7,579,371.80
EUR 209,717.66 8.0250 1,682,984.22
Other payables – – 3,081,392.95
Of which: USD
EUR 383,911.16 8.0250 3,080,887.06
JPY 8,000.03 0.0632 505.89
264 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
64. Foreign currency items (Cont’d)
(2) Explanation on overseas operating entities (including major overseas operating entities), which shall disclose
their overseas principal places of business, functional currency and basis. Reasons shall be disclosed if
there is any change in the functional currency.
√ Applicable Not applicable
Principal place of Place of Functional
No. Name of subsidiary business incorporation currency
1 Chenming GmbH Hamburg, Germany Hamburg, Germany EUR
2 Chenming Paper Korea Co., Ltd. Seoul, Korea Seoul, Korea KRW
3 Chenming International Co., Ltd. Los Angeles, USA Los Angeles, USA USD
4 Chenming Paper Japan Co., Ltd. Tokyo, Japan Tokyo, Japan JPY
5 Chenming Paper United States Co., Ltd. Los Angeles, USA Los Angeles, USA USD
6 Chenming (Overseas) Limited Hong Kong, China Hong Kong, China USD
7 Chenming (Singapore) Limited Singapore Singapore USD
8 Chenming (HK) Limited Hong Kong, China Hong Kong, China USD
2020 ANNUAL REPORT 265
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
65. Government grants
(1) General information of government grants
Unit: RMB
Amount included
in the current
Type Amount Reporting item profit and loss
Project Funding for National Key
Technology Research and
Development Program 164,700.00 Other income 164,700.00
Subsidy for the improvement in
environmental monitoring 20,000.00 Non-operating income 20,000.00
Subsidy for the provincial champion
of a certain manufacturing field 800,000.00 Non-operating income 800,000.00
Sewage treatment and water
conservation transformation
project 1,192,682.88 Other income 1,192,682.88
Zhanjiang forestry-pulp-paper
project 12,145,971.39 Other income 12,145,971.39
Enterprise reform and development Other income and non-
subsidies 107,578,937.51 operating income 107,578,937.51
Financial subsidies for technical
transformation project 101,984,107.72 Other income 101,984,107.72
Funding for environmental
protection 80,048,967.41 Other income 80,048,967.41
Funding for R&D 564,000.00 Other income 564,000.00
Subsidy for technological innovation
by enterprise 100,000.00 Other income 100,000.00
Refund of VAT upon assessment 1,846,849.03 Other income 1,846,849.03
Subsidy for foreign trade 211,200.00 Other income 211,200.00
Subsidy for top-notch talents 400,000.00 Non-operating income 400,000.00
Subsidy for equipment technologies 115,400.00 Other income 115,400.00
Other income and non-
Subsidy for inviting investments 6,306,806.25 operating income 6,306,806.25
Other income and non-
Employment stabilisation subsidies 4,856,411.21 operating income 4,856,411.21
Other income and non-
Subsidies for social insurance 486,607.82 operating income 486,607.82
Subsidies for R&D 2,469,900.00 Other income 2,469,900.00
Subsidies for financing 130,000.00 Other income 130,000.00
Refund of tax 71,675,835.40 Other income 71,675,835.40
Financial discount 3,753,300.60 Financial expenses 3,753,300.60
Other income and non-
Subsidies for the pandemic 1,495,150.00 operating income 1,495,150.00
Subsidies for forestation 6,316,370.50 Other income 6,316,370.50
Other income and non-
Others 540,115,190.13 operating income 540,115,190.13
Total 944,778,387.85 944,778,387.85
(2) The condition of the refund of government grants
Applicable √ Not applicable
266 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VIII. Change in scope of consolidation
1. Business combination not under common control
(1) Business combination not under common control during the current period
Unit: RMB
The net profit of
The income of acquiree from
acquiree from the the date of
Consideration The way of The basis for date of acquisition acquisition to
Date of acquiring for acquiring the Shareholding acquiring the determining the to the end of the end of the
Acquiree the shareholding shareholding ratio acquired shareholding Acquisition date date of acquisition the period period
Acquisition of
Kunshan Tuoan Plastic Products Co., Ltd. 31 August 2020 220,000,000.00 100.00% Acquisition 31 August 2020 control 126,970,053.68 7,770,967.40
(2) Cost of combination and goodwill
Unit: RMB
Cost of combination
– Cash 220,000,000.00
Total cost of combination 220,000,000.00
Less: the interest in the fair value of the identifiable net assets acquired 193,053,094.62
Amount of goodwill/cost of combination being less than the interest in the fair value of
the identifiable net assets acquired 26,946,905.38
2020 ANNUAL REPORT 267
XIII Financial Report
VIII. Change in scope of consolidation (Cont’d)
1. Business combination not under common control (Cont’d)
(3) Acquiree’s identifiable assets or liabilities as at the acquisition date
Unit: RMB
Carrying amount
Fair value as at as at the
the acquisition date acquisition date
Monetary funds 3,970,890.87 4,341,878.49
Accounts receivable 22,802,767.21 23,484,179.31
Inventories 87,355,065.38 81,634,148.00
Fixed assets 61,642,451.22 43,478,433.59
Intangible assets 40,181,103.63 12,532,077.88
Prepayments 913,954.62 913,954.62
Other receivables 121,051,049.75 121,051,049.75
Other current assets 92,948.20 348,349.39
Long-term prepaid expenses 211,858.41 210,619.47
Accounts payable 58,760,177.22 58,760,177.22
Deferred income tax liabilities 6,871,956.51
Short-term borrowings 49,800,000.00 49,800,000.00
Employee benefits payable 2,358,660.55 2,358,660.55
Taxes payable -5,828,397.35 -5,828,397.35
Other payables 5,845,173.43 5,845,173.43
Other current liabilities 2,161,424.31 2,161,424.31
Long-term payables 25,200,000.00 25,200,000.00
Net assets 193,053,094.62 149,697,652.34
Net assets acquired 193,053,094.62 149,697,652.34
268 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VIII. Change in scope of consolidation (Cont’d)
2. Disposal of subsidiaries
Whether there is loss of control over subsidiaries on a single disposal
√ Yes No
Unit: RMB
Difference
between Determination
consideration and key Relevant other
and share of net assumption of comprehensive
assets of relevant Carrying amount Fair value of fair value of i come of
Basis for subsid ary as per Remain ng of remain ng remain ng Gain or l ss i remain ng former
Consideration of Sharehold ng of Way of disposal determin ng the consol dated sharehold ng sharehold ng sharehold ng fair value of sharehold ng subsid ary
Name of disposal of equity disposal of of equity Time of l ss time of l ss financia as of the date as of the date as of the date remain ng as of the date transferred to
subsid ary i terest equity i terest i terest of control of control statements of l ss of control of l ss of control of l ss of control sharehold ng of l ss of control profit or l ss
Qingdao
Chenming
International
Logistics
Co., Ltd. 23,000,000.00 100.00% Transfer 29 February 2020 Without control 11,364,811.86 0.00% 0.00 0.00 0.00 0.00
Shouguang
Chenming
Industria
Logistics
Co., Ltd. 7,100,000.00 100.00% Transfer 29 February 2020 Without control 5,413,230.15 0.00% 0.00 0.00 0.00 0.00
Other explanation:
Whether there was disposal of the investment in a subsidiary in stages through multiple transactions and loss of
control during the period
Yes √ No
3. Others
During the year, the scope of consolidation had 8 newly established subsidiaries, namely Chenming (Overseas) Co.,
Ltd., Chenming (Singapore) Co., Ltd., Qingdao Chenming Import and Export Trade Co., Ltd., Hainan Chenming
Technology Co., Ltd., Hubei Changjiang Chenming Huanggang Equity Investment Fund Partnership (Limited
Partnership), Hubei Huanggang Chenming Equity Investment Fund Management Co., Ltd., Shandong Dingkun Asset
Management Partnership (Limited Partnership) and Huanggang Chenming Paper Technology Co., Ltd. During the
year, a subsidiary was acquired not within the definition of business, namely Shanghai Herui Investment Co., Ltd., and
a subsidiary, Shandong Chenming Paper Group (Fuyu) Sales Co., Ltd. was absorbed into the Group. Please refer to
Note IX. 1. Interest in subsidiaries for details.
2020 ANNUAL REPORT 269
XIII Financial Report
IX. Interest in other entities
1. Interest in subsidiaries
(1) Constitution of the Group
Principle place Place of Nature of Type of Shareholding Issued debt Issued share
Name of subsidiary of business incorporation business legal person Direct Indirect Acquisition securities capital
Zhanjiang Chenming Pulp Zhanjiang Zhanjiang Paper making For-profit 100.00% Establishment 0 0
& Paper Co., Ltd. corporation
Shouguang Meilun Paper Shouguang Shouguang Paper making For-profit 87.3965% Establishment 0 0
Co., Ltd. corporation
Jilin Chenming Paper Co., Jilin Jilin Paper making For-profit 100.00% Acquisition 0 0
Ltd. corporation
Huanggang Chenming Huanggang Huanggang Pulp production For-profit 100.00% Establishment 0 0
Pulp & Paper Co., Ltd. corporation
Shandong Chenming Shouguang Shouguang Sales of paper For-profit 100.00% Establishment 0 0
Paper Sales Co., Ltd. product corporation
Shouguang Chenming Shouguang Shouguang Trading For-profit 100.00% Establishment 0 0
Import and Export corporation
Trade Co., Ltd.
Jiangxi Chenming Supply Jiangxi Jiangxi Trading For-profit 70.00% Establishment 0 0
Chain Management corporation
Co., Ltd.
Chenming GmbH Germany Germany Paper product For-profit 100.00% Establishment 0 0
trading corporation
Shouguang Chenming Shouguang Shouguang Machinery For-profit 100.00% Establishment 0 0
Papermaking Machine manufacturing corporation
Co., Ltd.
Shouguang Hongxiang Shouguang Shouguang Printing and For-profit 100.00% Acquisition 0 0
Printing and Packaging packaging corporation
Co., Ltd.
Shouguang Chenming Shouguang Shouguang Transportation For-profit 100.00% Establishment 0 0
Modern Logistic Co., corporation
Ltd.
Jinan Chenming Paper Jinan Jinan Investment For-profit 100.00% Establishment 0 0
Sales Co., Ltd. Management/ corporation
Paper product
trading
Huanggang Chenming Huanggang Huanggang Arboriculture For-profit 100.00% Establishment 0 0
Arboriculture corporation
Development Co., Ltd.
Chenming Arboriculture Wuhan Wuhan Arboriculture For-profit 100.00% Establishment 0 0
Co., Ltd. corporation
Chenming Paper Korea Korea Korea Paper product For-profit 100.00% Establishment 0 0
Co., Ltd. trading corporation
Shandong Chenming Shouguang Shouguang Power For-profit 100.00% Establishment 0 0
Power Supply Holdings corporation
Co., Ltd.
270 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
IX. Interest in other entities (Cont’d)
1. Interest in subsidiaries (Cont’d)
(1) Constitution of the Group (Cont’d)
Principle place Place of Nature of Type of Shareholding Issued debt Issued share
Name of subsidiary of business incorporation business legal person Direct Indirect Acquisition securities capital
Shouguang Shun Da Shouguang Shouguang Customs For-profit 100.00% Establishment 0 0
Customs Declaration declaration corporation
Co, Ltd.
Shanghai Chenming Shanghai Shanghai Property For-profit 100.00% Establishment 0 0
Industry Co., Ltd. investment and corporation
management
Shandong Chenming Jinan Jinan Finance For-profit 80.00% 20.00% Establishment 0 0
Group Finance Co., Ltd. corporation
Jiangxi Chenming Paper Nanchang Nanchang Paper making For-profit 42.46% 47.49% Establishment 0 0
Co., Ltd. corporation
Shouguang Chenming Art Shouguang Shouguang Paper making For-profit 75.00% Establishment 0 0
Paper Co., Ltd. corporation
Hailaer Chenming Paper Hailaer Hailaer Paper making For-profit 75.00% Establishment 0 0
Co., Ltd. corporation
Shandong Grand View Shouguang Shouguang Catering For-profit 70.00% Establishment 0 0
Hotel Co., Ltd. corporation
Wuhan Chenming Wuhan Wuhan Paper making For-profit 65.205% 34.64% Establishment 0 0
Hanyang Paper corporation
Holdings Co., Ltd
Chengdu Chenming Chengdu Chengdu Marketing For-profit 100.00% Establishment 0 0
Culture Communication corporation
Co., Ltd
Shandong Chenming Jinan Jinan Financial leasing For-profit 100.00% Establishment 0 0
Financial Leasing Co., corporation
Ltd.
Qingdao Chenming Qingdao Qingdao Financial leasing For-profit 100.00% Establishment 0 0
Nonghai Financial corporation
Leasing Co., Ltd
Chenming (HK) Limited Hong Kong Hong Kong Paper product For-profit 100.00% Establishment 0 0
trading corporation
Shouguang Hongyi Shouguang Shouguang Packaging For-profit 100.00% Merger and 0 0
Decorative Packaging corporation acquisition
Co., Ltd.
Shouguang Xinyuan Coal Shouguang Shouguang Coal For-profit 100.00% Merger and 0 0
Co., Ltd. corporation acquisition
Shouguang City Run Shouguang Shouguang Purchase and sale For-profit 100.00% Merger and 0 0
Sheng Wasted Paper of waste corporation acquisition
Recycle Co., Ltd.
Shouguang Wei Yuan Shouguang Shouguang Logistics For-profit 100.00% Merger and 0 0
Logistics Company corporation acquisition
Limited
Shandong Chenming Shouguang Shouguang Panels For-profit 100.00% Merger and 0 0
Panels Co., Ltd. S corporation acquisition
2020 ANNUAL REPORT 271
XIII Financial Report
IX. Interest in other entities (Cont’d)
1. Interest in subsidiaries (Cont’d)
(1) Constitution of the Group (Cont’d)
Principle place Place of Nature of Type of Shareholding Issued debt Issued share
Name of subsidiary of business incorporation business legal person Direct Indirect Acquisition securities capital
Shandong Chenming Floor Shouguang Shouguang Floor Board For-profit 100.00% Merger and 0 0
Board Co., Ltd. corporation acquisition
Shouguang Chenming Shouguang Shouguang Cement For-profit 100.00% Establishment 0 0
Cement Co., Limited corporation
Wuhan Chenming Wuhan Wuhan Thermal power For-profit 51.00% Establishment 0 0
Qianneng Electric corporation
Power Co., Ltd.
Shandong Chenming Jinan Jinan Investment For-profit 100.00% Establishment 0 0
Investment Limited corporation
Japan Chenming Paper Japan Japan Paper product For-profit 100.00% Establishment 0 0
Co., Ltd. trading corporation
Chenming International the United States the United States Paper product For-profit 100.00% Establishment 0 0
Co., Ltd. trading corporation
Zhanjiang Chenming Zhanjiang Zhanjiang Arboriculture For-profit 100.00% Establishment 0 0
Arboriculture corporation
Development Co., Ltd.
Yangjiang Chenming Yangjiang Yangjiang Arboriculture For-profit 100.00% Establishment 0 0
Arboriculture corporation
Development Co., Ltd.
Nanchang Chenming Nanchang Nanchang Arboriculture For-profit 100.00% Establishment 0 0
Arboriculture corporation
Development Co., Ltd.
Guangdong Huirui Zhanjiang Zhanjiang Investment For-profit 100.00% Establishment 0 0
Investment Co., Ltd. corporation
Zhanjiang Chenming New- Zhanjiang Zhanjiang Wall materials For-profit 100.00% Establishment 0 0
style Wall Materials Co., corporation
Ltd
Jilin Chenming New-style Jilin Jilin Wall materials For-profit 100.00% Establishment 0 0
Wall Materials Co., Ltd corporation
Jilin Chenming Logistics Jilin Jilin Logistics For-profit 100.00% Establishment 0 0
Co., Ltd. corporation
Jiangxi Chenming Nanchang Nanchang Logistics For-profit 100.00% Establishment 0 0
Logistics Co., Ltd. corporation
Fuyu Chenming Paper Co., Fuyu Fuyu Paper making For-profit 100.00% Establishment 0 0
Ltd. corporation
Zhanjiang Meilun Pulp & Zhanjiang Zhanjiang Paper making For-profit 100.00% Establishment 0 0
Paper Co., Ltd. corporation
Shanghai Chenming Shanghai Shanghai Financial leasing For-profit 100.00% Establishment 0 0
Financial Leasing Co., corporation
Ltd.
Guangzhou Chenming Guangzhou Guangzhou Financial leasing For-profit 100.00% Establishment 0 0
Financial Leasing Co., corporation
Ltd.
272 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
IX. Interest in other entities (Cont’d)
1. Interest in subsidiaries (Cont’d)
(1) Constitution of the Group (Cont’d)
Principle place Place of Nature of Type of Shareholding Issued debt Issued share
Name of subsidiary of business incorporation business legal person Direct Indirect Acquisition securities capital
Shanghai Hongtai Real Shanghai Shanghai Real estate For-profit 100.00% Merger and 0 0
Estate Co., Ltd. corporation acquisition
Shanghai Hongtai Property Shanghai Shanghai Arboriculture For-profit 100.00% Merger and 0 0
Management Co., Ltd. corporation acquisition
Shandong Chenming Jinan Jinan Business factoring For-profit 100.00% Establishment 0 0
Commercial Factoring corporation
Co., Ltd
Guangzhou Chenming Guangzhou Guangzhou Business factoring For-profit 51.00% Establishment 0 0
Commercial Factoring corporation
Co., Ltd.
Qingdao Chenming Pulp Qingdao Qingdao Trading For-profit 30.00% 70.00% Establishment 0 0
& Paper Electronic corporation
Commodity Spot
Trading Co., Ltd.
Shandong Chenming Shouguang Shouguang Paper product For-profit 100.00% Establishment 0 0
Coated Paper Sales trading corporation
Co. Ltd
Zhanjiang Chenming Port Zhanjiang Zhanjiang Port For-profit 100.00% Establishment 0 0
Co., Ltd. corporation
Beijing Chenming Financial Beijing Beijing Financial leasing For-profit 100.00% Establishment 0 0
Leasing Co., Ltd. corporation
Chenming Paper United the United States the United States Paper product For-profit 100.00% Establishment 0 0
States Co., Ltd. trading corporation
Guangdong Chenming Guangdong Guangdong Panels For-profit 100.00% Establishment 0 0
Panels Co., Ltd. corporation
Shanghai Chenming Pulp Shanghai Shanghai Paper product For-profit 100.00% Establishment 0 0
& Paper Sales Co., Ltd. trading corporation
Meilun (BVI) Limited Cayman Cayman Commerce For-profit 100.00% Establishment 0 0
corporation
Weifang Chenming Growth Weifang Weifang Fund For-profit 79.00% Establishment 0 0
Driver Replacement corporation
Equity Investment Fund
Partnership (Limited
Partnership)
Nanjing Chenming Culture Nanjing Nanjing Marketing For-profit 100.00% Establishment 0 0
Communication Co., corporation
Ltd.
Chenming (Overseas) Co., Hong Kong Hong Kong Paper product For-profit 100.00% Establishment 0 0
Ltd. trading corporation
Chenming (Singapore) Co., Singapore Singapore Paper product For-profit 100.00% Establishment 0 0
Ltd. trading corporation
Kunshan Tuoan Plastic Kunshan Kunshan Rubber and plastic For-profit 100.00% Merger and 0 0
Products Co., Ltd. corporation acquisition
2020 ANNUAL REPORT 273
XIII Financial Report
IX. Interest in other entities (Cont’d)
1. Interest in subsidiaries (Cont’d)
(1) Constitution of the Group (Cont’d)
Principle place Place of Nature of Type of Shareholding Issued debt Issued share
Name of subsidiary of business incorporation business legal person Direct Indirect Acquisition securities capital
Hubei Changjiang Huanggang Huanggang Fund For-profit 59.97% Establishment 0 0
Chenming Huanggang corporation
Equity Investment Fund
Partnership (Limited
Partnership)
Hainan Chenming Haikou Haikou Wholesale and For-profit 100.00% Establishment 0 0
Technology Co., Ltd. retail corporation
Qingdao Chenming Import Qingdao Qingdao Trading For-profit 100.00% Establishment 0 0
and Export Trade Co., corporation
Ltd.
Shanghai Herui Investment Shanghai Shanghai Business services For-profit 100.00% Merger and 0 0
Co., Ltd. corporation acquisition
Hubei Huanggang Huanggang Huanggang Capital market For-profit 60.00% Establishment 0 0
Chenming Equity services corporation
Investment Fund
Management Co., Ltd.
Shandong Dingkun Shouguang Shouguang Business services For-profit 99.90% Establishment 0 0
Asset Management corporation
Partnership (Limited
Partnership)
Huanggang Chenming Huanggang Huanggang Paper making For-profit 100.00% Establishment 0 0
Paper Technology Co., corporation
Ltd.
Huanggang Chenming Huanggang Huanggang Port services For-profit 51.00% Establishment 0 0
Port Co., Ltd. corporation
(2) Major non-wholly owned subsidiaries
Unit: RMB
Gain or loss Dividend to
attributable to minority interest Closing balance
minority interest declared during of minority
Name of subsidiary Minority interest during the period the period interest
Wuhan Chenming Hanyang Paper
Holdings Co., Ltd. 0.15% 134,972,455.36 1,096,519.70
Shouguang Chenming Art Paper Co.,
Ltd. 25.00% 383,946.72 98,750,186.78
Shouguang Meilun Paper Co., Ltd. 12.6035% 24,854,458.98 746,482,412.98
Jiangxi Chenming Paper Co., Ltd. 10.05% 44,431,564.61 17,444,349.31 347,455,281.83
274 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
IX. Interest in other entities (Cont’d)
1. Interest in subsidiaries (Cont’d)
(3) Key financial information of major non-wholly owned subsidiaries
Unit: RMB
Closing balance Opening balance
Name of subsidiary Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities
Wuhan Chenming Hanyang
Paper Hold ngs Co., Ltd. 734,208,419.79 1,351,736,457.46 2,085,944,877.25 1,314,519,046.29 43,365,094.68 1,357,884,140.97 242,300,843.28 1,042,530,549.73 1,284,831,393.01 854,628,918.19 84,521,086.15 939,150,004.94
Shouguang Chenming Art
Paper Co., Ltd. 210,008,389.30 531,396,869.27 741,405,258.57 346,404,511.49 346,404,511.49 651,004,033.69 573,204,378.67 1,224,208,412.36 830,743,452.16 830,743,452.16
Shouguang Mei un Paper
Co., Ltd. 3,954,358,701.82 10,971,104,092.03 14,925,462,793.85 7,816,696,759.19 1,228,430,785.12 9,045,127,544.31 5,071,137,194.65 11,453,663,652.73 16,524,800,847.38 10,013,297,488.59 1,186,061,831.08 11,199,359,319.67
Jiangxi Chenming Paper
Co., Ltd. 2,898,786,538.59 4,742,116,901.13 7,640,903,439.72 2,918,424,625.58 1,377,979,879.82 4,296,404,505.40 5,176,446,285.48 3,845,100,253.80 9,021,546,539.28 4,643,403,573.27 1,194,736,398.81 5,838,139,972.08
Unit: RMB
Amount for the period Amount for the prior period
Total Total
comprehensive Cash flows from comprehensive Cash flows from
Name of subsidiary Revenue Net profit income operating activities Revenue Net profit income operating activities
Wuhan Chenming Hanyang
Paper Holdings Co., Ltd. 906,791,287.88 382,379,348.21 382,379,348.21 57,915,078.59 1,282,969,981.66 71,445,390.72 71,445,390.72 104,514,705.53
Shouguang Chenming Art Paper
Co., Ltd. 642,697,593.98 1,535,786.88 1,535,786.88 -345,949,577.00 765,841,628.21 68,355,698.51 68,355,698.51 -66,098,414.48
Shouguang Meilun Paper Co., Ltd. 8,070,365,747.22 219,893,721.83 219,893,721.83 1,505,697,902.65 5,199,154,922.05 199,184,684.14 199,184,684.14 1,510,148,358.58
Jiangxi Chenming Paper Co., Ltd. 3,434,854,907.78 265,237,736.13 265,237,736.13 1,352,811,772.58 3,257,505,575.39 285,914,254.01 285,914,254.01 800,733,878.52
2020 ANNUAL REPORT 275
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IX. Interest in other entities (Cont’d)
2. Transaction changing shareholding in but not causing to loss of control over subsidiaries
(1) Changing in shareholding in subsidiaries
The Group previously held 100% of equity interest in Shouguang Meilun Paper Co., Ltd. In December 2019, the
Company entered the capital increase and share expansion agreement among Weifang Chenrong Growth Driver
Replacement Equity Investment Fund Partnership (Limited Partnership) and Shouguang Meilun Paper Co., Ltd..
Weifang Chenrong Growth Driver Replacement Equity Investment Fund Partnership (Limited Partnership) made
a unilateral capital injection into Shouguang Meilun Paper Co., Ltd. Upon completion of the capital increase, its
equity interest in Shouguang Meilun Paper Co., Ltd.. was 8% by Weifang Chenrong Growth Driver Replacement
Equity Investment Fund Partnership (Limited Partnership), and the transaction did not result in the loss of our
control of Shouguang Meilun Paper Co., Ltd. As of 31 December 2019, the implementation of this agreement
was completed, and the capital increase was RMB415 million. The transaction resulted in an increase in minority
interest of RMB431.44 million and a decrease in capital reserves of RMB16.44 million.
In December 2020, the Group acquired additional 34.64% equity interest in Wuhan Chenming Hanyang Paper
Holdings Co., Ltd. In December 2020, the Group acquired additional 6.70% equity interest in Jiangxi Chenming
Paper Co., Ltd. A capital increase of Shouguang Meilun Paper Co., Ltd., a subsidiary of the Group, was
contributed on the part of Dongxing Securities Investment Co., Ltd. Upon completion of the capital increase,
Dongxing Securities Investment Co., Ltd. acquired 5% equity interest in Shouguang Meilun Paper Co., Ltd., and
the transaction did not result in the loss of the Group’s control over Shouguang Meilun Paper Co., Ltd.
(2) Effect of acquiring minority interests on minority interest and equity attributable to the owners of the parent
company
Unit: RMB
Wuhan Chenming
Hanyang Paper Jiangxi Chenming
Holdings Co., Ltd. Paper Co., Ltd.
– Cash 250,000,000.00 200,000,000.00
Less: share of net assets in subsidiaries based on shares
acquired/disposed 245,573,256.85 224,081,428.60
Difference 4,426,743.15 -24,081,428.60
Of which: capital reserve adjustment 4,426,743.15 -24,081,428.60
(3) Effect of capital increased contributed on the part of another shareholder on minority interests and equity
attributable to the owners of the parent company
Unit: RMB
Shouguang Meilun
Item Paper Co., Ltd.
Share of net assets of the Group before the capital increase 4,987,609,644.29
Amount of capital increase 300,000,000.00
Share of net assets of the Group after the capital increase 5,000,228,916.06
Difference -12,619,271.77
Of which: capital reserve adjustment -12,619,271.77
276 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
IX. Interest in other entities (Cont’d)
3. Interest in joint arrangements or associates
(1) Major joint ventures and associates
Principle Principle
Name of joint venture and place of place of Nature of Shareholding
associate business incorporation business Direct Indirect Accounting method
Weifang Senda Meixi Port Co., Port Equity
Ltd. Weifang Weifang construction 50.00% method
Ningbo Kaichen Huamei Equity
Investment Fund Partnership Investment Equity
(Limited Partnership) Ningbo Ningbo management 40.00% method
Weifang Xingxing United Equity
Chemical Co., Ltd. Weifang Weifang Chemical 50.00% method
Zhuhai Dechen New Third Board
Equity Investment Fund Investment Equity
Company (Limited Partnership) Zhuhai Zhuhai management 50.00% method
Equity
Goldtrust Futures Co., Ltd. Changsha Changsha Futures 35.43% method
Weifang Chenrong Growth
Driver Replacement Equity
Investment Fund Partnership Investment Equity
(Limited Partnership) Weifang Weifang management 44.44% method
Guangdong Nanyue Bank Co., Equity
Ltd. Guangdong Guangdong Bank 16.62% method
2020 ANNUAL REPORT 277
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IX. Interest in other entities (Cont’d)
3. Interest in joint arrangements or associates (Cont’d)
(2) Key financial information of major joint ventures
Unit: RMB
Closing balance/ Opening balance/
Amount for the period Amount for the prior period
Weifang Sime Weifang Xingxing Weifang Sime Weifang Xingxing
Darby West Port United Chemical Darby West Port United Chemical
Co., Ltd. Co., Ltd. Co., Ltd. Co., Ltd.
Current assets 11,717,494.06 118,868,385.80 26,890,506.23 94,334,994.14
Of which: Cash and cash equivalents 5,739,139.97 37,588,664.71 8,299,040.10 25,959,739.14
Non-current assets 526,006,172.67 24,644,081.09 543,566,206.60 32,100,379.42
Total assets 537,723,666.73 143,512,466.89 570,456,712.83 126,435,373.56
Current liabilities 17,876,446.30 26,318,294.93 16,216,196.08 27,927,549.31
Non-current liabilities 370,515,018.03 22,662,556.59 389,517,611.14
Total liabilities 388,391,464.33 48,980,851.52 405,733,807.22 27,927,549.31
Equity interest attributable to shareholders
of the parent company 149,332,202.40 94,531,615.37 164,722,905.61 98,507,824.25
Share of net assets based on shareholding 74,666,101.20 47,265,807.69 82,361,452.81 49,253,912.13
– Unrealised profit arising from intra-group
transactions 7,277,405.72 44,608,577.43 7,365,218.95 44,562,645.26
Carrying amount of investment in joint
ventures 81,943,506.92 91,874,385.12 89,726,671.76 93,816,557.39
Revenue 56,243,755.61 1,596,938.76 29,834,105.08 132,763,766.49
Finance expenses 21,875,452.03 -733,877.86 20,667,999.05 -394,709.39
Income tax expenses 4,706,185.72
Net profit -15,604,782.40 -3,183,622.90 -26,827,919.17 14,118,557.12
Total comprehensive income -15,604,782.40 -3,183,622.90 -26,827,919.17 14,118,557.12
Dividend received from joint ventures during
the year 23,000,000.00
278 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
IX. Interest in other entities (Cont’d)
3. Interest in joint arrangements or associates (Cont’d)
(3) Key financial information of major associates
Unit: RMB
Closing balance/Amount for the period Opening balance/Amount for the prior period
Weifang Chenrong
Weifang Chenrong Growth Zhuhai Dechen New Growth Driver
Ningbo Kaichen Huamei Zhuhai Dechen New Third Driver Replacement Ningbo Kaichen Huamei Third Board Equity Replacement Equity
Equity I vestment Fund Board Equity I vestment Equity I vestment Fund Equity I vestment Fund I vestment Fund I vestment Fund
Partnership ( i i ed Fund Company ( i i ed Goldtrust Futures Partnership ( i i ed Guangdong Nanyue Partnership ( i i ed Company ( i i ed Goldtrust Futures Partnership ( i i ed Guangdong Nanyue
Partnership Partnership Co. Ltd. Partnership Bank Co. Ltd. Partnership Partnership Co. Ltd. Partnership Bank Co. Ltd.
Current assets 24,928,544.79 5,788,211.20 764,236,547.83 281.95 70,627,194,227.70 43,709,912.78 5,810,979.79 514,865,137.33 8,000,250.00 43,993,240,945.90
Non-current assets 171,877,206.00 99,020,108.00 18,545,737.98 450,000,000.00 169,970,138,147.42 154,450,006.00 99,020,000.00 13,965,721.72 407,000,000.00 162,549,835,269.08
Total assets 196,805,750.79 104,808,319.20 782,782,285.81 450,000,281.95 240,597,332,375.12 198,159,918.78 104,830,979.79 528,830,859.05 415,000,250.00 206,543,076,214.98
Current l abi i i s 19,749.95 5,000.00 544,534,428.24 15,000.00 197,253,124,440.72 21,826.94 5,000.00 281,568,856.43 8,000,000.00 172,504,238,508.02
Non-current l abi i i s 32,169,041.10 24,930,860,850.46 30,000,000.00 17,098,918,091.65
Total l abi i i s 19,749.95 5,000.00 576,703,469.34 15,000.00 222,183,985,291.18 21,826.94 5,000.00 311,568,856.43 8,000,000.00 189,603,156,599.67
Net assets 196,786,000.84 104,803,319.20 206,078,816.47 449,985,281.95 18,413,347,083.94 198,138,091.84 104,825,979.79 217,262,002.62 407,000,250.00 16,847,722,509.11
Share of net assets based on sharehold ng 78,714,400.34 52,401,659.62 73,013,724.68 199,973,459.30 3,060,298,285.35 79,255,236.74 52,412,989.90 76,975,927.53 180,870,911.10 2,800,091,481.01
– Goodwi l 104,073,292.25 104,073,292.25
– Others 119,835,525.93 12,279,914.66 -267,823.00 120,273,610.78 11,683,737.93 -22,870,911.10
Carrying amount of i vestment i j i t ventures 198,549,926.27 52,401,659.62 189,366,931.59 199,705,636.28 3,060,298,285.35 199,528,847.52 52,412,989.90 192,732,957.71 158,000,000.00 2,800,091,481.01
Revenue 49,996,217.01 1,232,673.27 4,849,150,132.82 48,222,356.65 11,008,440,467.50
Net profit -2,447,303.13 -22,660.59 -9,500,497.09 -14,968.05 1,539,105,400.52 -154,058.98 318,344.37 329,683.17 250.00 1,634,495,792.15
Total comprehensive i come -2,447,303.13 -22,660.59 -9,500,497.09 -14,968.05 1,539,105,400.52 -154,058.98 318,344.37 329,683.17 250.00 1,634,495,792.15
(4) Summary financial information of non-major joint ventures and associates
Unit: RMB
Closing balance/ Opening balance/
Amount for the period Amount for the prior period
Joint ventures: – –
Total carrying amount of investment 22,032,934.47 9,669,667.61
Total amount of the following items based on
shareholding – –
– Net profit 1,646,466.86 2,216,832.82
– Total comprehensive income 1,646,466.86 2,216,832.82
Associates: – –
Total carrying amount of investment 9,985,136.83 10,359,850.83
Total amount of the following items based on
shareholding – –
– Net profit -374,714.00 -494,921.70
– Total comprehensive income -374,714.00 -494,921.70
2020 ANNUAL REPORT 279
XIII Financial Report
X. Risk relating to financial instruments
Main financial instruments of the Group include monetary funds, bills receivable, accounts receivable, other receivables,
non-current assets due within one year, other current assets, other non-current financial assets, long-term receivables,
short-term borrowings, accounts payable, other payables, short-term borrowings, non-current liabilities due within one year,
long-term borrowings, bonds payable and Long-term payables. Details of financial instruments refer to related notes. The
risks associated with these financial instruments and the risk management policies adopted by the Company to mitigate
these risks are described below. The management of the Company manages and monitors these exposures to ensure that
the above risks are controlled in a limited extent.
1. Risk management goals and policies
The Group aims to seek the appropriate balance between the risks and benefits in order to mitigate the adverse
effects on the Group’s financial performance from financial risk. Based on such objectives, the Group’s risk
management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk
limits and devise corresponding internal control procedures, and to monitor risks faced by the Group. Such risk
management policies and internal control systems are reviewed regularly to adapt to changes in market conditions
and the Group’s activities. The internal audit department of the Group undertakes both regular and ad-hoc reviews of
risk management controls and procedures.
Risks associated with the financial instrument of the Group mainly include credit risk, liquidity risk, market risk (including
exchange rate risk, interest rate risk and commodity price risk).
The board of directors is responsible to plan and establish the Group’s risk management structure, make risk
management policies and related guidelines, and supervise the implementation of risk management. The Group has
already made risk management risks to identify and analyse risks that the Group face. These policies mentioned
specific risks, covering market, credit risk and liquidity risk etc. The Group regularly assesses market environment and
the operation of the Group changes to determine if to make alteration to risk management policy and systems. The
Group’s risk management is implemented by Risk Management Committee according to the approval of the board of
directors. The Risk Management Committee works closely with other business department of the Group to identify,
evaluating and avoiding certain risks. The Group’s internal audit department will audit the risk management control
and procedures regularly and report the result to audit committee of the Group.
The Group spreads risks through diverse investment and business lines, and through making risk management policy
to reduce risks of single industry, specific area and counterpart.
(1) Credit risks
Credit risk refers to risk associated with the default of contract obligation of a transaction counterparty.
The Group manages credit risk based category. Credit risks mainly arose from bank deposit, bills receivable,
accounts receivable, other receivables and long-term receivables etc.
The Group’s bank deposit mainly deposits in state-owned banks and other large and medium-sized listed
banks. The Group anticipated that the bank deposit does not have significant credit risk.
For bill receivable, accounts receivables, other receivables and long-term receivables, the Group set related
policies to control exposure of credit risks. The Group evaluate client’s credit quality and set related credit
period based on the client’s financial status, credit records and other factors such as current market situation
etc. The Group keep monitor the client’s credit record and for client with deteriorate credit records, the Group
will ensure the credit risk is under control in whole by means of written notice of payment collection, shorten or
cancel credit period.
280 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
X. Risk relating to financial instruments (Cont’d)
1. Risk management goals and policies (Cont’d)
(1) Credit risks (Cont’d)
The Group’s debtor spread over different industry and area. The Group continued to assess the credit evaluation
to receivables and purchase credit guarantee insurance if necessary.
The biggest credit risk exposure of the Group is the carrying amount of each financial asset in the balance
sheet. The Group did not provide financial guarantee which resulted in credit risks.
The amount of top 5 accounts receivable of the Group accounted for 21.47% (2019: 29.05%) of the Group’s
total accounts receivables. The amount of top 5 other receivable of the Group accounted for 81.22% (2019:
87.09%) of the Group’s total other receivables.
(2) Liquidity risk
Liquidity risk refers to the risks that the Group will not be able to meet its obligations associated with its financial
liabilities that are settled by delivering cash or other financial assets.
To manage the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents to finance
the Group’s operations and mitigate the effects of fluctuations in cash flows. The management of the Group
monitors the usage of bank borrowings and ensures compliance with the borrowing agreements. In the
meantime, we obtain commitments from major financial institutions to provide sufficient standby funds to meet
short-term and long-term funding needs.
Operating cash was generated from capital and bank and other borrowings. As of 31 December 2020, the
Group’s unused bank loan credit is RMB38,894.7823 million (31 December 2019: 34,072.1416 million).
2020 ANNUAL REPORT 281
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X. Risk relating to financial instruments (Cont’d)
1. Risk management goals and policies (Cont’d)
(2) Liquidity risk (Cont’d)
As at the end of the period, the financial assets and financial liabilities of the Group are analysed by their
maturity date as below at their undiscounted contractual cash flows (in ten thousand RMB):
2020.12.31
Item Within 1 year 1-2 years 2-3 years 3-4 years Over 4 years Total
Financial assets:
Monetary funds 1,775,953.76 1,775,953.76
Accounts receivable 247,416.05 247,416.05
Accounts receivable
financing 48,838.57 48,838.57
Other receivables 296,054.64 296,054.64
Long-term receivables 452,285.93 61,971.92 3,420.00 517,677.85
Other current assets 271,691.87 271,691.87
Non-current assets due
within one year 422,274.42 422,274.42
Total financial assets 3,062,229.31 452,285.93 61,971.92 3,420.00 3,579,907.16
Financial liabilities:
Short-term borrowings 3,279,399.30 3,279,399.30
Bills payable 299,893.67 299,893.67
Accounts payable 404,243.07 404,243.07
Other payables 177,772.24 177,772.24
Non-current liabilities due
within one year 716,094.96 716,094.96
Other current liabilities 15,703.78 15,703.78
Long-term borrowings 258,446.95 203,956.69 10,909.00 334,402.46 807,715.10
Bonds payable 153,687.74 153,687.74
Lease liabilities 443.29 472.83 5,111.06 6,027.18
Long-term payables 148,649.69 64,102.65 16,778.59 229,530.93
Total financial liabilities and
contingent liabilities 4,893,107.02 561,227.67 268,532.17 32,798.65 334,402.46 6,090,067.97
282 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
X. Risk relating to financial instruments (Cont’d)
1. Risk management goals and policies (Cont’d)
(2) Liquidity risk (Cont’d)
As at the beginning of the period, the financial assets and financial liabilities of the Group at the reporting date
are analysed by their maturity date as below at their undiscounted contractual cash flows (in ten thousand
RMB):
2019.12.31
Item Within 1 year 1-2 years 2-3 years 3-4 years Over 4 years Total
Financial assets:
Monetary funds 1,906,656.98 1,906,656.98
Accounts receivable 307,736.22 307,736.22
Accounts receivable
financing 44,291.59 44,291.59
Other receivables 270,183.01 270,183.01
Long-term receivables 17,413.54 23,488.20 81,470.83 122,372.57
Other current assets 808,452.56 808,452.56
Non-current assets due
within one year 697,303.80 697,303.80
Total financial assets 4,034,624.16 17,413.54 23,488.20 81,470.83 4,156,996.73
Financial liabilities:
Short-term borrowings 3,688,315.60 3,688,315.60
Bills payable 151,504.82 151,504.82
Accounts payable 435,108.76 435,108.76
Other payables 238,605.99 238,605.99
Non-current liabilities due
within one year 566,295.89 566,295.89
Other current liabilities 22,240.25 22,240.25
Long-term borrowings 521,440.85 117,319.88 86,672.98 188,600.26 914,033.97
Bonds payable 116,920.09 8,907.00 125,827.09
Lease liabilities 457.07 443.29 472.83 7,220.12 8,593.31
Long-term payables 64,272.98 96,887.59 83,321.65 87,671.33 332,153.55
Total financial liabilities and
contingent liabilities 5,102,071.31 703,090.99 223,557.76 170,467.46 283,491.71 6,482,679.23
The financial liabilities disclosed above are based on cash flows that are not discounted and may differ from the
carrying amount of the line items of the balance sheet.
Financial guarantees issued do not represent the amount to be paid.
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X. Risk relating to financial instruments (Cont’d)
1. Risk management goals and policies (Cont’d)
(3) Market risk
Market risk includes interest rate risk and currency risk, refers to the risk that the fair value or future cash flow of
a financial instrument will be fluctuated due to the changes in market price.
Interest risk
Interest rate risk refers to the risk that the fair value or future cash flow of a financial instrument will be fluctuated
due to the floating rate. Interest rate risk arises from recognised interest-bearing financial instrument and
unrecognised financial instrument (e.g. loan commitments).
The Group’s interest rate risk arises from long-term interest-bearing liabilities including long-term borrowing
and bonds payable. Financial liabilities issued at floating rate expose the Group to cash flow interest rate risk.
Financial liabilities issued at fixed rate expose the Group to fair value interest rate risk. The Group determines
the relative proportions of its fixed rate and floating rate contracts depending on the prevailing market
conditions and to maintain an appropriate combination of financial instruments at fixed rate and floating rate
through regular reviews and monitors.
The Group’s finance department continuously monitors the interest rate position of the Group. The Group did
not enter into any interest rate hedging arrangements. But the management is responsible to monitor the risks
of interest rate and consider to hedge significant interest risk if necessary. Increase in interest rates will increase
the cost of new borrowing and the interest expenses with respect to the Group’s outstanding floating rate
interest-bearing borrowings, and therefore could have a material adverse effect on the Group’s financial result.
The management will make adjustments with reference to the latest market conditions. These adjustments may
include enter into interest swap agreement to mitigate its exposure to the interest rate risk.
Interest bearing financial instrument held by the Group are as follows (in ten thousand RMB):
Balance for Balance for
Item the year the prior year
Financial instrument with fixed interest rate
Financial liabilities
Of which: Short-term borrowings 3,279,399.30 3,688,315.60
Long-term borrowings 807,715.10 914,033.97
Bonds payable 153,687.74 125,827.09
Total 4,240,802.14 4,728,176.66
Financial instrument with float interest rate
Financial assets
Of which: Monetary funds 438,700.83 288,790.99
Total 438,700.83 288,790.99
284 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
X. Risk relating to financial instruments (Cont’d)
1. Risk management goals and policies (Cont’d)
(3) Market risk (Cont’d)
The financial instruments held by the Group at the reporting date expose the Group to fair value interest rate
risk. This sensitivity analysis as above has been determined assuming that the change in interest rates had
occurred at the reporting date and arisen from the recalculation of the above financial instrument issued at new
interest rates. The non-derivative tools issued at floating interest rate held by the Group at the reporting date
expose the Group to cash flow interest rate risk. The effect to the net profit and shareholder’s equity illustrated
in the sensitivity analysis as above is arisen from the effect to the annual estimate amount of interest expenses
or revenue at the floating interest rate. The analysis is performed on the same basis for prior year.
Exchange rate risk
Exchange risk refers to the risk that the fair value or future cash flows of a financial instrument will be fluctuated
due to the changes in foreign currency rates. Foreign currency risk arises on financial instruments that are
denominated in a currency other than the functional currency in which they are measured.
The principal business of the Group is situated within the PRC and is denominated in RMB. However,
foreign exchange risks still exist for the assets and liabilities in foreign currencies and future foreign currency
transactions as recognised by the Group (assets and liabilities in foreign currencies and foreign currency
transactions are mainly denominated in US dollar, Japanese yen, South Korean Won and Euro).
The following table details the financial assets and liabilities held by the Group which denominated in foreign
currencies and amounted to RMB as at 31 December 2020 are as follows (in RMB ten thousands):
Liabilities denominated Asset denominated in
in foreign currency foreign currency
As at the As at the As at the As at the
end of beginning of end of beginning of
Item the period the period the period the period
USD 589,167.11 453,753.14 36,393.34 147,730.57
EUR 2,692.09 9,890.43 4,547.15 5,131.53
HKD 9,131.73 3,150.80 294.97 63.69
KRW
YEN 0.05 880.88 941.18
GBP 4.64 1.86
Total 600,990.98 466,794.37 42,120.98 153,868.83
The Company closely monitors the impact of exchange rate changes on the Company’s foreign exchange
risk. The Company has not taken any measures to avoid foreign exchange risks. However, the management is
responsible for monitoring exchange rate risks and will consider hedging significant exchange rate risks when
necessary.
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X. Risk relating to financial instruments (Cont’d)
1. Risk management goals and policies (Cont’d)
(3) Market risk (Cont’d)
With other variables unchanged, the after-tax effect of the possible reasonable changes in the exchange rate of
foreign currency to RMB on the current profit and loss of the Group is as follows (in RMB ten thousands):
Increase (decrease) in after-tax profits Balance for the year Balance for the prior year
Increase in exchange rate of USD 5% -22,154.09 5% -15,301.13
Decrease in exchange rate of USD -5% 22,154.09 -5% 15,301.13
Increase in exchange rate of Euro 5% 92.75 5% -237.95
Decrease in exchange rate of Euro -5% -92.75 -5% 237.95
2. Capital management
The objective of the Group’s capital risk management is to safeguard the Group’s ability to continue as a going
concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the number of dividends paid to
shareholders, return capital to shareholders, issue new shares or disposes assets to reduce its liabilities.
The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net liabilities divided by total
capital. As at 31 December 2020, the Group’s gearing ratio is 71.83% (31 December 2019: 73.11%).
XI. Fair value
1. Fair value of assets and liabilities measured at fair value as at the end of the period
Unit: RMB
Fair value as at the end of the period
Item Level 1 Level 2 Level 3 Total
I. Continuous measurement of fair value – – – –
(I) Financial liabilities held for trading 192,907,800.62 192,907,800.62
1. Equity instrument investments 192,907,800.62 192,907,800.62
(II) Biological assets 1,535,386,865.44 1,535,386,865.44
1. Consumable biological assets 1,535,386,865.44 1,535,386,865.44
(III) Accounts receivable financing 488,385,666.76 488,385,666.76
(IV) Other non-current financial assets 145,910,000.00 145,910,000.00
Total assets continuously measured at
fair value 192,907,800.62 2,169,682,532.20 2,362,590,332.82
II. Non-continuous measurement of fair value – – – –
286 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XI. Fair value (Cont’d)
2. Quantitative Information About Significant Unobservable Inputs Used in the Level 3 Fair Value
Measurement that Are Significant
Unit: RMB
Fair value as at the
Item end of the period Valuation techniques Unobservable inputs Range
Equity instrument investments:
Shandong Hongqiao Venture Capital Co., Ltd. 90,910,000.00 Cost method
Consumable biological assets:
Forestry 1,535,386,865.44 Replacement cost Cost per mu for the first year of 806.00(ton/RMB)
method Eucalyptus
Cost per mu for the first year of 592.00(ton/RMB)
Pines
Roll back method of Unit price per ton of Eucalyptus 575.00(ton/RMB)
market price wood
Unit price per ton of wet pine 430.00(ton/RMB)
Unit price per ton of Chinese fir 800.00(ton/RMB)
XII. Related parties and related party transactions
1. Parent company of the Company
Shareholding of the Voting right of the
Place of parent company parent company in
Name of parent company incorporation Business nature Registered capital in the Company the Company
Chenming Holdings Co., Ltd. Shouguang Investment in manufacture of paper, electricity, 1,238,787,700 27.53% 27.53%
steam, and arboriculture
The ultimate controller of the Company is Shouguang State-owned Assets Supervision and Administration Office.
2. Subsidiaries of the Company
For subsidiaries of the Company, please refer to Note IX. 1.
2020 ANNUAL REPORT 287
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XII. Related parties and related party transactions (Cont’d)
3. Joint ventures and associates of the Company
For details of joint ventures or associates, please refer to Note IX. 3.
Balance of related party transaction between the Company and its joint ventures or associates during the period or
prior periods are as follows:
Name of joint ventures or associates Relation
Shouguang Meite Environmental Technology Co., Ltd. A joint venture of the Group
Weifang Xingxing United Chemical Co., Ltd. A joint venture of the Group
Shouguang Chenming Huisen New-style Construction
Materials Co., Ltd. A joint venture of the Group
Jiangxi Jiangbao Media Colour Printing Co., Ltd. An associate of the Group
Chenming (Qingdao) Asset Management Co., Ltd. An associate of the Group
Jiangxi Chenming Port Co., Ltd. An associate of the Group
Weifang Sime Darby West Port Co., Ltd. A joint venture of the Group
Guangdong Nanyue Bank Co., Ltd. An associate of the Group
4. Other related parties
Name of other related parties Relation
Shandong Shouguang Jinxin Investment Development Shareholder of the Company’s largest shareholder
Holdings Group Co., Ltd.
Shouguang Henglian Enterprise Investment Limited Shareholder of the Company’s largest shareholder
Shouguang Ruifeng Enterprise Investment Limited Shareholder of the Company’s largest shareholder
Chenming Holdings (Hong Kong) Limited Subsidiary of the Company’s largest shareholder
Zhanjiang Chenming Real Estate Co., Ltd. Subsidiary of the Company’s largest shareholder
Qingdao Hongji Weiye Investment Co., Ltd. Subsidiary of the Company’s largest shareholder
Shouguang Hengying Real Estate Co., Ltd. Subsidiary of the Company’s largest shareholder
Shouguang Hengtai Enterprise Investment Co., Ltd. A company invested by the Directors and senior
management of the Company
Shouguang Huixin Construction Materials Co., Ltd. A company invested by the Directors and senior
management of the Company
Shouguang Chenming Guangyuan Real Property Co., A company invested by the Directors and senior
Ltd. and its subsidiaries management of the Company
Qingdao Chenming Nonghai Investment Co., Ltd. and its A company invested by the Directors and senior
subsidiaries management of the Company
Nanchang Chenjian New-style Wall Materials Co., Ltd. A company invested by the Directors and senior
management of the Company
Shouguang Hengde Real Estate Co., Ltd. A company invested by the Directors and senior
management of the Company
Zhejiang Huaming Investment Management Co., Ltd. Directors and senior management served by the
and its subsidiaries Company’s Directors
Hebei Chenming Zhongjin Real Estate Development Co., Directors served by the Company’s Supervisors and
Ltd. and its subsidiaries senior management
Wuhan Chenming Zhongjin Real Estate Co., Ltd. and its Directors served by the Company’s Supervisors
subsidiaries
Wuhan Rongsheng Zhongjin Development and Directors served by the Company’s Supervisors
Investment Co., Ltd. and its subsidiaries
288 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XII. Related parties and related party transactions (Cont’d)
4. Other related parties (Cont’d)
Name of other related parties Relation
Qingzhou Chenming Denaturation Amylum Co., Ltd. Investee of the Company
Lide Technology Co., Ltd. Investee of the Company
Jiangxi Jiuyu Energy Co., Ltd. and its subsidiaries Directors and senior management served by the
Company’s Directors in the past twelve months
Chen Hongguo, Hu Changqing, Li Xingchun, Li Feng, Li Key management personnel
Xueqin, Geng Guanglin, Li Weixian, Li Zhenzhong, Li
Feng, Chen Gang, Dong Lianming and Yuan Xikun
5. Related party transactions
(1) Purchase and sales of goods and rendering and receiving services
Table on purchase of goods/receiving of services
Unit: RMB
Whether the
Details of Amount for Transaction Transaction
related party the reporting facility facility is Amount for the
Related party transaction period approved exceeded prior period
Jiangxi Jiuyu Energy Co., Procurement of natural 255,158,150.43 600,000,000.00 No 381,124,206.33
Ltd. gas and heavy oil, etc.
Weifang Xingxing United Procurement of 80,638,768.49
Chemical Co., Ltd. hydrogen peroxide
etc.
Lide Technology Co., Ltd. Service expense 3,240,300.00 No
Table on sales of goods/providing of services
Unit: RMB
Details of related party Amount for the Amount for the
Related party transaction reporting period prior period
Shouguang Chenming Huisen New- Sales of electricity and 8,668,152.00 7,064,454.19
style Construction Materials Co., steam
Ltd.
Shouguang Huixin Construction Sales of cement, coal, oil, 4,662,205.59 13,402,439.72
Materials Co., Ltd. etc.
Related party transactions regarding purchase and sale of goods and provision and receipt of services
2020 ANNUAL REPORT 289
XIII Financial Report
XII. Related parties and related party transactions (Cont’d)
5. Related party transactions (Cont’d)
(2) Guarantee
The Company as guarantor
Unit: RMB
Whether
performance
Amount under Starting date Expiry date of guarantee
Guarantor Party being guaranteed guarantee of guarantee of Guarantee is completed
Shandong Chenming Paper Holdings Weifang Sime Darby West Port
Limited Co., Ltd. 124,800,000.00 2017/12/20 2027/12/20 No
Shandong Chenming Paper Holdings
Limited Chenming (HK) Limited 119,405,670.00 2018/4/23 2021/4/7 No
Shandong Chenming Paper Holdings
Limited Chenming (HK) Limited 68,511,450.00 2018/5/4 2021/4/6 No
Shandong Chenming Paper Holdings
Limited Chenming (HK) Limited 43,064,340.00 2018/5/17 2021/5/5 No
Shandong Chenming Paper Holdings
Limited Chenming (HK) Limited 131,150,490.00 2019/4/30 2022/4/22 No
Shandong Chenming Paper Holdings
Limited Chenming (HK) Limited 65,249,000.00 2020/6/2 2021/5/30 No
Shandong Chenming Paper Holdings Hainan Chenming Technology
Limited Co., Ltd. 300,000,000.00 2020/12/11 2021/3/10 No
Shandong Chenming Paper Holdings Hainan Chenming Technology
Limited Co., Ltd. 80,000,000.00 2020/12/18 2021/3/17 No
Shandong Chenming Paper Holdings Huanggang Chenming Pulp &
Limited Paper Co., Ltd. 43,690,000.00 2017/1/5 2021/3/26 No
Shandong Chenming Paper Holdings Huanggang Chenming Pulp &
Limited Paper Co., Ltd. 43,690,000.00 2017/1/5 2021/6/26 No
Shandong Chenming Paper Holdings Huanggang Chenming Pulp &
Limited Paper Co., Ltd. 3,900,000.00 2017/1/5 2021/9/26 No
Shandong Chenming Paper Holdings Huanggang Chenming Pulp &
Limited Paper Co., Ltd. 36,260,000.00 2017/2/3 2021/9/26 No
Shandong Chenming Paper Holdings Huanggang Chenming Pulp &
Limited Paper Co., Ltd. 40,160,000.00 2017/2/3 2021/12/26 No
Shandong Chenming Paper Holdings Huanggang Chenming Pulp &
Limited Paper Co., Ltd. 40,160,000.00 2017/2/3 2022/3/26 No
Shandong Chenming Paper Holdings Huanggang Chenming Pulp &
Limited Paper Co., Ltd. 33,420,000.00 2017/2/3 2022/6/26 No
Shandong Chenming Paper Holdings Huanggang Chenming Pulp &
Limited Paper Co., Ltd. 200,000,000.00 2020/10/22 2021/10/21 No
Shandong Chenming Paper Holdings Huanggang Chenming Pulp &
Limited Paper Co., Ltd. 300,000,000.00 2020/12/23 2021/12/23 No
Shandong Chenming Paper Holdings Huanggang Chenming Pulp &
Limited Paper Co., Ltd. 20,000,000.00 2020/3/23 2021/3/22 No
Shandong Chenming Paper Holdings Huanggang Chenming Pulp &
Limited Paper Co., Ltd. 96,942,436.11 2020/4/14 2021/4/13 No
290 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XII. Related parties and related party transactions (Cont’d)
5. Related party transactions (Cont’d)
(2) Guarantee (Cont’d)
Whether
performance
Amount under Starting date Expiry date of guarantee
Guarantor Party being guaranteed guarantee of guarantee of Guarantee is completed
Shandong Chenming Paper Holdings Huanggang Chenming Pulp &
Limited Paper Co., Ltd. 30,000,000.00 2020/6/9 2021/6/8 No
Shandong Chenming Paper Holdings Huanggang Chenming Pulp &
Limited Paper Co., Ltd. 38,057,563.89 2020/6/19 2021/6/18 No
Shandong Chenming Paper Holdings
Limited Jilin Chenming Paper Co., Ltd. 20,000,000.00 2020/3/16 2021/2/26 No
Shandong Chenming Paper Holdings Jiangxi Chenming Paper Co.,
Limited Ltd. 200,000,000.00 2019/6/28 2022/6/27 No
Shandong Chenming Paper Holdings Jiangxi Chenming Paper Co.,
Limited Ltd. 300,000,000.00 2019/7/1 2022/6/27 No
Shandong Chenming Paper Holdings Jiangxi Chenming Paper Co.,
Limited Ltd. 85,000,000.00 2019/10/23 2022/6/27 No
Shandong Chenming Paper Holdings Jiangxi Chenming Paper Co.,
Limited Ltd. 114,750,000.00 2019/11/22 2022/6/27 No
Shandong Chenming Paper Holdings Jiangxi Chenming Paper Co.,
Limited Ltd. 26,800,000.00 2020/2/14 2021/2/13 No
Shandong Chenming Paper Holdings Jiangxi Chenming Paper Co.,
Limited Ltd. 60,000,000.00 2020/2/24 2021/2/23 No
Shandong Chenming Paper Holdings Jiangxi Chenming Paper Co.,
Limited Ltd. 99,000,000.00 2020/3/3 2021/3/2 No
Shandong Chenming Paper Holdings Jiangxi Chenming Paper Co.,
Limited Ltd. 49,500,000.00 2020/3/19 2021/3/19 No
Shandong Chenming Paper Holdings Jiangxi Chenming Paper Co.,
Limited Ltd. 150,000,000.00 2020/3/20 2021/3/19 No
Shandong Chenming Paper Holdings Jiangxi Chenming Paper Co.,
Limited Ltd. 90,000,000.00 2020/3/27 2021/3/26 No
Shandong Chenming Paper Holdings Jiangxi Chenming Paper Co.,
Limited Ltd. 100,000,000.00 2020/4/10 2021/4/9 No
Shandong Chenming Paper Holdings Jiangxi Chenming Paper Co.,
Limited Ltd. 70,000,000.00 2020/4/15 2021/4/14 No
Shandong Chenming Paper Holdings Jiangxi Chenming Paper Co.,
Limited Ltd. 73,000,000.00 2020/5/27 2021/5/26 No
Shandong Chenming Paper Holdings Jiangxi Chenming Paper Co.,
Limited Ltd. 13,433,306.20 2020/9/4 2021/3/3 No
Shandong Chenming Paper Holdings Jiangxi Chenming Paper Co.,
Limited Ltd. 24,403,126.00 2020/10/29 2021/4/14 No
Shandong Chenming Paper Holdings Jiangxi Chenming Paper Co.,
Limited Ltd. 11,648,409.40 2020/12/7 2021/6/5 No
Shandong Chenming Paper Holdings Jiangxi Chenming Paper Co.,
Limited Ltd. 150,000,000.00 2020/12/18 2021/12/17 No
2020 ANNUAL REPORT 291
XIII Financial Report
XII. Related parties and related party transactions (Cont’d)
5. Related party transactions (Cont’d)
(2) Guarantee (Cont’d)
Whether
performance
Amount under Starting date Expiry date of guarantee
Guarantor Party being guaranteed guarantee of guarantee of Guarantee is completed
Shandong Chenming Paper Holdings Jiangxi Chenming Paper Co.,
Limited Ltd. 25,000,000.00 2020/12/21 2021/5/28 No
Shandong Chenming Paper Holdings Shandong Chenming Paper
Limited Sales Co., Ltd. 253,272,043.36 2020/3/9 2021/3/4 No
Shandong Chenming Paper Holdings Shandong Chenming Paper
Limited Sales Co., Ltd. 60,000,000.00 2020/3/31 2021/1/22 No
Shandong Chenming Paper Holdings Shandong Chenming Paper
Limited Sales Co., Ltd. 420,456,575.63 2020/5/6 2021/5/2 No
Shandong Chenming Paper Holdings Shandong Chenming Paper
Limited Sales Co., Ltd. 100,000,000.00 2020/6/10 2021/6/7 No
Shandong Chenming Paper Holdings Shandong Chenming Paper
Limited Sales Co., Ltd. 270,000,000.00 2020/6/16 2021/1/22 No
Shandong Chenming Paper Holdings Shandong Chenming Paper
Limited Sales Co., Ltd. 100,000,000.00 2020/7/15 2021/7/12 No
Shandong Chenming Paper Holdings Shanghai Chenming Pulp &
Limited Paper Sales Co., Ltd. 5,000,000.00 2020/5/11 2021/5/10 No
Shandong Chenming Paper Holdings Shanghai Chenming Pulp &
Limited Paper Sales Co., Ltd. 10,000,000.00 2020/12/23 2021/12/23 No
Shandong Chenming Paper Holdings Shouguang Meilun Paper Co.,
Limited Ltd. 124,976,460.75 2020/7/9 2021/7/9 No
Shandong Chenming Paper Holdings Shouguang Meilun Paper Co.,
Limited Ltd. 124,663,481.19 2020/9/22 2021/3/22 No
Shandong Chenming Paper Holdings Shouguang Meilun Paper Co.,
Limited Ltd. 100,000,000.00 2020/9/29 2021/9/29 No
Shandong Chenming Paper Holdings Shouguang Meilun Paper Co.,
Limited Ltd. 132,277,786.95 2020/12/7 2021/6/5 No
Shandong Chenming Paper Holdings Wuhan Chenming Hanyang
Limited Paper Holdings Co., Ltd. 30,000,000.00 2020/8/6 2021/6/23 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 200,000,000.00 2019/7/12 2021/7/12 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 140,000,000.00 2019/12/4 2021/12/3 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 645,965,100.00 2019/12/27 2022/12/27 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 100,000,000.00 2020/1/14 2021/1/13 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 125,000,000.00 2020/1/21 2021/1/21 No
292 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XII. Related parties and related party transactions (Cont’d)
5. Related party transactions (Cont’d)
(2) Guarantee (Cont’d)
Whether
performance
Amount under Starting date Expiry date of guarantee
Guarantor Party being guaranteed guarantee of guarantee of Guarantee is completed
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 100,000,000.00 2020/2/11 2021/2/10 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 50,000,000.00 2020/2/18 2021/2/12 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 100,000,000.00 2020/2/19 2021/2/18 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 326,245,000.00 2020/2/26 2021/2/25 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 300,000,000.00 2020/2/29 2021/2/28 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 30,000,000.00 2020/3/13 2021/3/10 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 70,000,000.00 2020/3/13 2021/3/12 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 35,234,460.00 2020/3/25 2021/3/24 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 100,000,000.00 2020/3/25 2021/3/25 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 50,000,000.00 2020/3/27 2021/3/22 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 29,362,050.00 2020/5/21 2021/5/18 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 58,071,610.00 2020/7/1 2021/6/25 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 99,000,000.00 2020/7/16 2021/1/12 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 90,000,000.00 2020/8/6 2021/2/2 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 200,000,000.00 2020/8/14 2021/3/9 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 50,000,000.00 2020/8/18 2021/8/12 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 89,000,000.00 2020/9/15 2021/9/14 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 99,600,000.00 2020/9/16 2021/3/15 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 110,000,000.00 2020/10/16 2021/10/15 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 80,000,000.00 2020/10/16 2023/10/15 No
2020 ANNUAL REPORT 293
XIII Financial Report
XII. Related parties and related party transactions (Cont’d)
5. Related party transactions (Cont’d)
(2) Guarantee (Cont’d)
Whether
performance
Amount under Starting date Expiry date of guarantee
Guarantor Party being guaranteed guarantee of guarantee of Guarantee is completed
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 80,000,000.00 2020/10/19 2022/10/13 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 30,000,000.00 2020/11/4 2021/11/3 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 45,674,300.00 2020/11/5 2021/10/13 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 90,000,000.00 2020/11/6 2021/5/5 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 90,000,000.00 2020/11/6 2021/5/5 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 115,000,000.00 2020/11/11 2023/11/10 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 90,000,000.00 2020/11/12 2021/11/11 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 90,000,000.00 2020/11/16 2021/11/15 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 51,500,000.00 2020/11/18 2021/5/12 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 166,668,000.00 2020/11/18 2021/11/17 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 30,000,000.00 2020/12/1 2021/11/30 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 190,989,910.80 2020/12/4 2021/3/4 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 200,000,000.00 2020/12/4 2021/12/3 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 100,000,000.00 2020/12/10 2023/12/9 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 50,000,000.00 2020/12/18 2021/12/17 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 100,000,000.00 2020/12/18 2021/12/17 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 32,624,500.00 2020/12/24 2021/12/17 No
Shandong Chenming Paper Holdings Zhanjiang Chenming Pulp &
Limited Paper Co., Ltd. 30,000,000.00 2020/12/31 2021/1/4 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. Chenming (HK) Limited 241,967,137.90 2018/8/8 2021/5/25 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. Chenming (HK) Limited 241,967,137.90 2018/8/8 2021/5/25 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. Chenming (HK) Limited 232,286,440.00 2018/9/4 2021/6/21 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. Chenming (HK) Limited 232,286,440.00 2018/9/6 2021/6/21 No
294 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XII. Related parties and related party transactions (Cont’d)
5. Related party transactions (Cont’d)
(2) Guarantee (Cont’d)
Whether
performance
Amount under Starting date Expiry date of guarantee
Guarantor Party being guaranteed guarantee of guarantee of Guarantee is completed
Zhanjiang Chenming Pulp & Paper Co., Ltd. Chenming (HK) Limited 97,873,500.00 2019/3/28 2021/6/16 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. Chenming (HK) Limited 97,873,500.00 2019/3/28 2022/1/7 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. Chenming (HK) Limited 192,060,431.50 2019/4/2 2021/6/10 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. Chenming (HK) Limited 192,060,431.50 2019/4/2 2022/1/6 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. Chenming (HK) Limited 127,235,550.00 2019/7/19 2021/6/19 No
Jiangxi Chenming Paper Co., Ltd. Chenming (HK) Limited 87,132,862.11 2020/3/19 2021/3/9 No
Jiangxi Chenming Paper Co., Ltd. Chenming (HK) Limited 7,177,390.00 2020/11/18 2021/3/9 No
Shandong Chenming Financial Leasing Co., Zhanjiang Chenming Pulp & 120,000,000.00 2020/8/5 2021/8/5 No
Ltd. Paper Co., Ltd.
Shanghai Herui Investment Co., Ltd. Shouguang Meilun Paper Co., 200,000,000.00 2020/12/4 2022/6/27 No
Ltd.
Shanghai Herui Investment Co., Ltd. Shouguang Meilun Paper Co., 424,000,000.00 2020/12/4 2023/10/30 No
Ltd.
Shanghai Herui Investment Co., Ltd. Wuhan Chenming Hanyang 6,000,000.00 2020/12/4 2023/10/30 No
Paper Holdings Co., Ltd.
Shanghai Herui Investment Co., Ltd. Huanggang Chenming Pulp & 200,000,000.00 2020/12/4 2023/10/30 No
Paper Co., Ltd.
Total 12,811,497,891.19
(3) Related party lending and borrowing
Unit: RMB
Related party Borrowing amount Starting date Expiry date Description
Borrowing
Chenming Holdings Co., Ltd. 660,300,000.00 1 January 2020 31 December 2020
Guangdong Nanyue Bank Co., Ltd. 1,316,664,000.00 18 September 2020 28 December 2021
Lending
Shouguang Meite Environmental Technology
Co., Ltd. 16,307,200.00 29 June 2020 24 December 2024
2020 ANNUAL REPORT 295
XIII Financial Report
XII. Related parties and related party transactions (Cont’d)
5. Related party transactions (Cont’d)
(4) Interests of related party lending and borrowing
Unit: RMB
Details of related Amount during Amount during
Related party party transaction the year the prior year
Weifang Sime Darby West Port Co., Ltd. Interest income 4,019,600.00 4,052,621.83
Shouguang Meite Environmental
Technology Co., Ltd. Interest income 341,680.26
Guangdong Nanyue Bank Co., Ltd. Interest expenses 96,774,311.73
Chenming Holdings Co., Ltd. Interest expenses 7,563,200.00 27,905,072.21
(5) Remuneration of key management staff
Unit: RMB’ 0,000
Amount during Amount during
Item the year the prior year
Remuneration of key management staff 3,067.34 3,057.25
(6) Other related party transactions
Distribution band of remuneration of key management staff
Amount during Amount during
the year the prior year
Band of annual remuneration (RMB’ 0,000) (RMB’ 0,000)
Total 3,067.34 3,057.25
Of which: (number of staff in each band of amount)
RMB4.80-5.20 million 2 2
RMB3.60-4.00 million
RMB3.20-3.60 million 1
RMB2.80-3.20 million 3 1
RMB2.40-2.80 million 0 1
RMB2.00-2.40 million 0 2
RMB1.60-2.00 million 1 3
RMB1.20-1.60 million 2
RMB0.80-1.20 million 2
Below RMB0.80 million 14 21
296 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XII. Related parties and related party transactions (Cont’d)
5. Related party transactions (Cont’d)
(6) Other related party transactions (Cont’d)
Breakdown of remuneration of key management staff
Amount during the year (RMB’ 0,000)
Basic annual Social welfare Payments of Total
Key management staff remuneration contribution housing funds (RMB’ 0,000)
Yin Meiqun 20.00 20.00
Yang Biao 20.00 20.00
Sun Jianfei 20.00 20.00
Sub-total of independent non-executive
Directors 60.00 60.00
Li Chuanxuan 20.00 20.00
Han Tingde 20.00 20.00
Sub-total of non-executive Directors 40.00 40.00
Chen Hongguo 492.22 5.43 1.35 499.00
Hu Changqing 294.73 3.06 2.21 300.00
Li Xingchun 480.00 480.00
Li Feng 328.82 5.43 1.35 335.60
Sub-total of executive Directors 1,595.77 13.92 4.91 1,614.60
Li Kang 57.32 5.43 1.35 64.10
Pan Ailing 10.00 10.00
Zhang Hong 10.00 10.00
Li Xinggui 15.58 3.84 0.88 20.30
Qiu Lanju 58.88 4.25 0.97 64.10
Total of Supervisor 151.78 13.52 3.20 168.50
Sub-total of other senior management
members 1,142.84 32.88 8.52 1,184.24
Total 2,990.39 60.32 16.63 3,067.34
2020 ANNUAL REPORT 297
XIII Financial Report
XII. Related parties and related party transactions (Cont’d)
5. Related party transactions (Cont’d)
(6) Other related party transactions (Cont’d)
Breakdown of remuneration of key management staff (Cont’d)
Amount during the prior year (RMB’ 0,000)
Basic annual Social welfare Payments of Total
Key management staff remuneration contribution housing funds (RMB’ 0,000)
Yin Meiqun 11.67 11.67
Yang Biao 11.67 11.67
Sun Jianfe 11.67 11.67
Pan Ailing 11.20 11.20
Huang Le 5.37 5.37
Liang Fu 5.37 5.37
Wang Fengrong 5.37 5.37
Sub-total of independent non-executive
Directors 62.32 62.32
Li Chuanxuan 11.67 11.67
Han Tingde 11.67 11.67
Yang Guihua 5.37 5.37
Zhang Hong 11.20 11.20
Sub-total of non-executive Directors 39.91 39.91
Chen Hongguo 488.20 7.1 3.7 499.00
Hu Zhangqing 288.90 11.10 3.90 303.90
Li Xingchun 499.00 499.00
Geng Guanglin 151.60 7.10 3.70 162.40
Li Feng 176.00 7.10 3.70 186.80
Chen Gang 86.70 6.50 3.50 96.70
Sub-total of executive Directors 1690.40 38.90 18.50 1747.80
Pan Ailing Reflected in the aforementioned independent non-executive Directors
Zhang Hong Reflected in the aforementioned non-executive Directors
Li Xinggui 17.10 5.30 2.00 24.40
Qiu Lanju 20.70 4.20 2.00 26.90
Li Dong 0 0
Sun Yinghua 7.30 3.60 2.50 13.40
Zhang Xiaofeng 1.12 1.12
Total of Supervisor 46.22 13.10 6.50 65.82
Sub-total of other senior management
members 1,068.90 45.20 27.30 1,141.40
Total 2,907.75 97.20 52.30 3,057.25
298 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XII. Related parties and related party transactions (Cont’d)
5. Related party transactions (Cont’d)
(6) Other related party transactions (Cont’d)
The 5 highest paid individuals of the Company during the year comprised of 4 directors and 1 other senior
management member of the Company. The remuneration band of the 1 senior management member was
RMB2.40-2.80 million.
A. Remuneration of the five highest paid individuals
Amounts during Amounts during
the year (in ten the prior year (in ten
Item thousand RMB) thousand RMB)
Basic annual remuneration 1,887.99 1,751.10
Provident fund 6.26 15.00
Social welfare contribution 19.35 32.40
Total 1,913.60 1,798.5 0
B. Distribution band of remuneration of the five highest paid individuals
Number of
Number of individuals
individuals during the
Band of annual remuneration during the year prior year
RMB4.80-5.20 million 2 2
RMB3.20-3.60 million 1
RMB2.80-3.20 million 2 1
RMB2.40-2.80 million 0 1
RMB2.00-2.40 million 1
RMB1.60-2.00 million
RMB1.20-1.60 million
For the financial year ended 31 December 2020, no other bonuses, which are discretionary or are based
on the Company’s, the Group’s or any member of the Group’s performance, were paid to or receivable by
the five highest paid individuals, and no other emoluments were paid by the Company to the directors of
the Company and the 5 highest paid individuals as an inducement to join or upon joining the Company or
as compensation for loss of office. None of the directors waived any emoluments during the year.
2020 ANNUAL REPORT 299
XIII Financial Report
XII. Related parties and related party transactions (Cont’d)
6. Related party accounts receivable and accounts payable
(1) Accounts receivables
Unit: RMB
Closing balance Opening balance
Item Related party Book balance Bad debt Book balance Bad debt
Prepayments Shouguang Hengyuan Energy Co., 6,829,643.97 20,179,937.87
Ltd.
Other receivables Shouguang Hengyuan Energy Co., 10,000,000.00 757,910.97
Ltd.
Accounts Shouguang Chenming Huisen 2,000,017.96 87,306.27 2,008,185.60 61,132.76
receivable New-style Construction Materials
Co., Ltd.
Prepayments Jiangxi Jiuyu Energy Co., Ltd. 9,354,736.54 15,358,225.83
Other receivables Weifang Sime Darby West Port 68,476,127.98 19,038,071.06 64,889,583.26 5,151,661.58
Co., Ltd.
Other receivables Shouguang Meite Environmental 16,307,200.00 70,132.59
Technology Co., Ltd.
(2) Accounts payable
Unit: RMB
Item Related party Closing balance Opening balance
Accounts payable Weifang Xingxing United Chemical 26,905,494.34 26,905,494.34
Co., Ltd.
Other payables Chenming Holdings Co., Ltd. 708,440,865.27
Other payables Weifang Xingxing United Chemical 16,860,000.00
Co., Ltd.
Accounts payable Jiangxi Jiuyu Energy Co., Ltd. 2,141,855.60 3,054,956.65
Other non-current liabilities Guangdong Nanyue Bank Co., Ltd. 400,000,000.00 400,000,000.00
300 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XII. Related parties and related party transactions (Cont’d)
6. Related party accounts receivable and accounts payable (Cont’d)
(3) Deposits with related parties
Unit: RMB
Item Related party Closing balance Opening balance
Bank deposit Guangdong Nanyue Bank Co., Ltd. 655,073,601.28 85,668.46
Other monetary funds Guangdong Nanyue Bank Co., Ltd. 724,668,000.00 2,414,668,000.00
(4) Loans from related parties
Unit: RMB
Item Related party Closing balance Opening balance
Short-term borrowings Guangdong Nanyue Bank Co., Ltd. 1,716,664,600.00 2,948,970,000.00
XIII. Share-based payment
1. General information of share-based payment
√ Applicable Not applicable
Unit: RMB
Total equity instruments of the Company granted during the period 79,600,000.00
Total exercised equity instruments of the Company during the period 0.00
Total invalid equity instruments of the Company during the period 0.00
2020 ANNUAL REPORT 301
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XIII. Share-based payment (Cont’d)
2. Equity-settled share-based payment
√ Applicable Not applicable
Unit: RMB
The method of determining the fair value of equity instrument on the grant date Ex-right price of grant of share
Basis for determining the quantity of exercisable equity instruments See explanation for details
Reasons for significant difference between the current estimate and previous
estimate None
Accumulated amount of equity-settled share-based payment included in the
capital reserve 32,486,925.23
Total amount of equity-settled share-based payment recognised in the current
period 32,486,925.23
Other explanation
On 29 May 2020, the Resolution on the Matters Relating to Adjustments to the 2020 Restricted A Share Incentive
Scheme of the Company and the Resolution in Relation to the Grant of Restricted Shares to the Participants were
considered and approved at the tenth extraordinary meeting of ninth session of the Board and the fifth extraordinary
meeting of the ninth session of the Supervisory Committee of the Company. It is determined that the grant date would
be 29 May 2020, and the fair value of the restricted shares was the ex-rights price of the shares on the grant date.
The Restricted Shares to be granted under the Incentive Scheme were “granted once and unlocked in batches”. For
the period commencing from the first trading day after expiry of the 24-month period from the date on which the
registration of the grant of the Restricted Shares is completed and ending on the last trading day of the 36-month
period from the date on which the registration of the grant of the Restricted Shares is completed, 40% of the
Restricted Shares will be unlocked; for the period commencing from the first trading day after expiry of the 36-month
period from the date on which the registration of the grant of the Restricted Shares is completed and ending on the
last trading day of the 48-month period from the date on which the registration of the grant of the Restricted Shares
is completed, 30% of the Restricted Shares will be unlocked; for the period commencing from the first trading day
after expiry of the 48-month period from the date on which the registration of the grant of the Restricted Shares is
completed and ending on the last trading day of the 60-month period from the date on which the registration of the
grant of the Restricted Shares is completed, 30% of the Restricted Shares will be unlocked. Meanwhile, during the
three accounting years from 2021 to 2023, the Restricted Shares granted under the Incentive Scheme shall be subject
to annual performance appraisal for unlocking. (for details of specific performance evaluation conditions, please refer
to the announcement of the Company). At each balance sheet date during the vesting period, the Company, based
on the latest information such as the latest update on the change in the number of entitled employees, will make best
estimates to adjust the expected number of equity instruments that can be vested. As at the exercise date, the final
estimated number of exercisable equity instruments should equal the actual number of exercisable equity instruments.
302 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XIV. Undertaking and contingency
1. Significant commitments
(1) Capital commitment
Unit: RMB
Capital commitments contracted for but not yet necessary to
be recognised on the balance sheet Closing balance Opening balance
Commitments in relation to acquisition and construction of
long-term assets 236,106,766.83 260,421,348.84
2. Contingency
(1) Significant contingency as at the balance sheet date
(1) Contingent liabilities arising from pending litigation and its financial impacts
In October 2005, the Company and Hong Kong Arjowiggins HKK2 Limited (“HKK2”) jointly established
ArjoWiggins Chenming Specialty Paper Co., Ltd. in Shouguang, Shandong Province, which is engaged in
the production of special paper, decoration paper and draft paper. However, such company experienced
poor management due to financial crisis. Hence, such company was forced to dissolve in October 2008.
In October 2012, HKK2 submitted for arbitration application to Hong Kong International Arbitration Centre,
Hong Kong Special Administration of PRC, on the ground of default of the joint venture agreement by the
Company. In November 2015, Hong Kong International Arbitration Centre announced arbitration result,
stating that the Company should compensate HKK2 with economic loss of RMB167 million, arbitration fee
of HK$3.30 million and legal fee of USD3.54 million, together with interest thereon calculated at 8% per
annum. In October 2016, the Company received a statutory demand, stating that if the Company fails to
perform the arbitration results within 21 days, the liquidation application on H shares of the Company will
be submitted. Subsequently, HKK2 submitted H shares liquidation application to the arbitration centre.
In November 2016, the Company submitted application to the Court of First Instance of the High Court
of the HKSAR and received an injunction, stating that “the applicant is prohibited from applying for
liquidation on the Company”.
In February 2017, HKK2 submitted an appeal to the court. In June 2017, the court dismissed the injunction
received by the Group. In the same month, the Group received the liquidation application submitted by
the defendant to the High Court of Hong Kong, which alleged that the Group should compensate the
defendant with economic loss of RMB167 million, legal fee of USD3.54 million and arbitration fee of
HK$3.30 million, together with interest thereon due to failure in compliance of the arbitration results.
In 2017, the Group made provision of RMB325,259,082.28 for the pending litigation.
Relevant appeal hearing of the Group on 15 July 2017 was completed in the Hong Kong High Court
Appeal Court on the morning of 11 May 2018. At the end of the hearing, the court had instructed that
another sentence be adjudicated.
On 5 August 2020, the Court of Appeal of the High Court of Hong Kong made a judgment and rejected
our Company’s appeal request. The Company is seeking ways to re-appeal to protect the legal rights and
interests of the Company and investors. However, as of 31 December 2020, the estimated loss was still
uncertain. Therefore, the estimated liability must still be listed in the balance sheet.
As of 31 December 2020, the Group had no other contingencies that should be disclosed.
2020 ANNUAL REPORT 303
XIII Financial Report
XV. Post-balance sheet event
1. Significant non-adjusting events
Unit: RMB
Effect to financial positions Reason for not reliably
Item Content and operating results estimated
Redemption of Preference Redemption of the first Reduction of other
Shares tranche of Preference equity instruments by
Shares RMB2,238.75 million
and reduction of capital
reserves by RMB11.25
million
Conversion of B shares to Conversion of B shares in No impact on financial
H shares issue to H shares position and operating
results of the Company
2. Profit distribution
Unit: RMB
Profits or dividends declared upon consideration and approval 661,044,485.66
3. Description of other events after the balance sheet date
As of 25 March, 2021, the Group has no other events that should be disclosed after the balance sheet date.
XVI. Other material matters
1. Segment information
(1) Basis for determination and accounting policies
According to the Group’s internal organisational structure, management requirements and internal reporting
system, the Group’s operating business is divided into 5 reporting segments. These report segments are
determined based on the financial information required by the company’s daily internal management. The
management of the Group regularly evaluates the operating results of these reporting segments to determine
the allocation of resources to them and evaluate their performance.
The Group’s reporting segments include:
(1) Machine paper segment, which is responsible for production and sales of machine paper;
(2) Financial services segment, which provides financial services;
(3) Investment real estate segment, which is responsible for property rental;
(4) Other segments, which is responsible for the above segments otherwise.
Segment report information is disclosed in accordance with the accounting policies and measurement standards
adopted by each segment when reporting to management. These accounting policies and measurement basis
are consistent with the accounting policies and measurement basis used in preparing the financial statements.
304 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XVI. Other material matters (Cont’d)
1. Segment information (Cont’d)
(2) Financial Information of Reporting Segment
Unit: RMB
Machine-made Financial Investment Inter-segment
Item paper Services real estate Others offset Total
Revenue 29,206,314,400.24 1,303,678,561.03 151,740,341.85 1,031,966,112.04 957,181,418.26 30,736,517,996.90
Of which: revenue from external transactions 29,021,523,071.50 964,291,738.17 106,560,951.52 644,142,235.71 – 30,736,517,996.90
Revenue from inter-segment transactions 184,791,328.74 339,386,822.86 45,179,390.33 387,823,876.33 957,181,418.26 –
Of which: Revenue from principal activities 28,594,757,850.60 1,296,660,729.91 112,314,230.97 1,010,794,035.98 967,268,762.49 30,047,258,084.97
Operating costs 22,470,534,868.13 814,315,100.61 148,685,628.57 886,839,688.41 674,781,099.51 23,645,594,186.21
Of which: Costs of principal activities 21,844,528,171.28 809,063,515.98 148,685,628.57 880,444,724.37 636,013,221.48 23,046,708,818.72
Operating expenses 284,006,730.90 3,323,648.60 3,882,243.08 28,268,491.44 21,234,758.11 298,246,355.91
Operating profit/(loss) 3,892,491,894.59 305,864,065.35 -235,657,128.38 53,729,771.94 2,431,707,113.42 1,584,721,490.08
Total assets 85,124,126,091.25 20,946,044,723.43 6,523,946,950.46 7,476,608,772.00 28,495,268,708.52 91,575,457,828.62
Total liabilities 61,104,154,700.00 12,593,437,439.88 4,242,547,284.17 3,226,363,801.40 15,391,309,112.07 65,775,194,113.38
2. Government grants
(1) Government subsidies included in deferred income will be subsequently measured using the gross method
Unit: RMB
Amount transferred Presentable items
New subsidy amount to profit or loss for transferred to Asset-related/
Item of subsidies Type Closing balance for the period the period Other movements Closing balance profit or loss revenue-related
Project Funding for National
Key Technology Research Financial
and Development Program appropriation 1,452,525.00 164,700.00 1,287,825.00 Other income Asset-related
Sewage treatment and
water conservation Financial
transformation project appropriation 63,274,136.71 3,673,020.38 59,601,116.33 Other income Asset-related
Huanggang forestry-pulp- Financial
paper project appropriation 681,564,072.66 28,398,506.40 653,165,566.26 Other income Asset-related
Zhanjiang forestry-pulp-paper Financial
project appropriation 67,047,201.50 12,145,971.39 54,901,230.11 Other income Asset-related
Industrial logistics
park reconstruction Financial
compensation appropriation 51,960,000.00 51,960,000.00 Investment income Asset-related
Financial subsidies for
technical transformation Financial
project appropriation 168,182,448.80 12,496,307.72 155,686,141.08 Other income Asset-related
Funding for environmental Financial
protection appropriation 700,228,305.19 27,420,000.00 50,008,737.63 677,639,567.56 Other income Asset-related
Financial
Others appropriation 37,304,645.25 1,589,455.08 35,715,190.17 Other income Asset-related
Total 1,771,013,335.11 27,420,000.00 108,476,698.60 51,960,000.00 1,637,996,636.51
2020 ANNUAL REPORT 305
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XVI. Other material matters (Cont’d)
2. Government grants (Cont’d)
(2) Government subsidies calculated into the current profit and loss using the total method
Unit: RMB
Amount credited to profit Amount credited to profit Presentable items Asset-related/
Subsidy Item Type or loss for the prior period or loss for the period included in profit or loss revenue-related
Project Funding for National Key Technology Financial 164,700.00 164,700.00 Other income Asset-related
Research and Development Program appropriation
Environmental Monitoring and Monitoring Financial 20,000.00 Non-operating income Revenue-related
Capability Improvement Subsidies appropriation
Provincial manufacturing individual championship Financial 800,000.00 Non-operating income Revenue-related
subsidy appropriation
Sewage treatment and water conservation Financial 1,192,682.88 1,192,682.88 Other income Asset-related
transformation project appropriation
Zhanjiang forestry-pulp-paper project Financial 4,094,632.92 12,145,971.39 Other income Asset-related
appropriation
Industrial logistics park reconstruction Financial 4,705,900.00 Other income Revenue-related
compensation appropriation
Enterprise reform and development subsidies Financial 31,070,010.00 107,578,937.51 Other income and non- Revenue-related
appropriation operating income
Financial subsidies for technical transformation Financial 110,054,807.72 101,984,107.72 Other income Asset-related and revenue-
project appropriation related
Funding for environmental protection Financial 49,361,843.85 72,505,645.88 Other income Asset-related
appropriation
Huanggang pulp-forestry-paper project Financial 7,543,321.53 Other revenue Asset-related
appropriation
Research and development grants Financial 74,923,512.88 564,000.00 Other income Revenue-related
appropriation
Enterprise technology innovation subsidies Financial 100,000.00 Other income Revenue-related
appropriation
Immediate VAT refund Financial 1,217,058.15 1,846,849.03 Other income Revenue-related
appropriation
Subsidies for foreign trade projects Financial 211,200.00 Other income Revenue-related
appropriation
Leading talent subsidy Financial 400,000.00 Non-operating income Revenue-related
appropriation
Equipment technology subsidies Financial 115,400.00 Other income Revenue-related
appropriation
Investment promotion subsidy Financial 41,542,500.00 6,306,806.25 Other income and non- Revenue-related
appropriation operating income
Job stabilisation subsidy Financial 4,856,411.21 Other income and non- Revenue-related
appropriation operating income
Social security subsidies Financial 486,607.82 Other income and non- Revenue-related
appropriation operating income
R&D subsidy Financial 2,469,900.00 Other income Revenue-related
appropriation
Financing subsidy Financial 130,000.00 Other income Revenue-related
appropriation
Tax return Financial 80,382,428.92 71,675,835.40 Other income Revenue-related
appropriation
Government awards Financial 228,000,000.00 Other income Revenue-related
appropriation
Financial discount Financial 22,364,612.22 3,753,300.60 Finance expenses Revenue-related
appropriation
Pandemic subsidy Financial 1,495,150.00 Other income and non- Revenue-related
appropriation operating income
Afforestation subsidy Financial 3,891,820.00 6,316,370.50 Other income Revenue-related
appropriation
Others Financial 17,307,907.75 540,115,190.13 Other income and non- Revenue-related
appropriation operating income
Total 670,274,417.29 944,778,387.85
306 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XVI. Other material matters (Cont’d)
3. Net Current Assets and Total Assets less Current Liabilities
(1) Net current assets
Unit: RMB’ 0,000
Closing balance Opening balance
Current assets 3,588,225.01 4,495,243.39
Less: Current liabilities 5,104,623.47 5,269,876.89
Net current assets -1,516,398.46 -774,633.50
(2) Total assets less current liabilities
Unit: RMB’ 0,000
Closing balance Opening balance
Total assets 9,157,545.78 9,795,890.99
Less: Current liabilities 5,104,623.47 5,269,876.89
Total assets less current liabilities 4,052,922.31 4,526,014.10
XVII. Major Item Notes of the Parent Company’s Financial Statements
1. Accounts receivable
(1) Disclosure of accounts receivable by category
Unit: RMB
Closing balance Opening Balance
Book balance Bad debt provision Carrying value Book balance Bad debt provision Carrying value
Type Amount Percentage Amount ECL rate Amount Percentage Amount ECL rate
Accounts receivable assessed
i div dual y for i pairment 778,063.57 1.73% 778,063.57 100.00%
Of which:
Accounts receivable assessed
col ectively for i pairment 698,032,192.53 100.00% 3,195,631.29 0.46% 694,836,561.24 44,083,258.79 98.27% 4,878,588.79 11.07% 39,204,670.00
Of which:
Accounts receivable from related
party customers 692,218,139.26 99.17% 692,218,139.26 31,427,654.36 70.06% 157,138.27 0.50% 31,270,516.09
Accounts receivable from non-
related party customers 5,814,053.27 0.83% 3,195,631.29 54.96% 2,618,421.98 12,655,604.43 28.21% 4,721,450.52 37.31% 7,934,153.91
Total 698,032,192.53 100.00% 3,195,631.29 0.46% 694,836,561.24 44,861,322.36 100.00% 5,656,652.36 12.61% 39,204,670.00
2020 ANNUAL REPORT 307
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XVII. Major Item Notes of the Parent Company’s Financial Statements (Cont’d)
1. Accounts receivable (Cont’d)
(1) Disclosure of accounts receivable by category (Cont’d)
Accounts receivable assessed collectively for impairment: Accounts receivable from related party customers
Unit: RMB
Closing balance
Ageing Book balance Bad debt provision ECL rate
Within 1 year 692,218,139.26
Total 692,218,139.26 –-
Accounts receivable assessed collectively for impairment: Accounts receivable from non-related party
customers
Unit: RMB
Closing balance
Ageing Book balance Bad debt provision Percentage
Within 1 year 2,811,232.10 192,810.12 6.86%
1-2 years
2-3 years
Over 3 years 3,002,821.17 3,002,821.17 100.00%
Total 5,814,053.27 3,195,631.29 54.96%
If the bad debt provision of accounts receivable is made in accordance with the general model of ECLs, please
disclose the information about bad debt provision with reference to the way of disclosure of other receivables:
√ Applicable Not applicable
By ageing
Unit: RMB
Ageing Closing balance Opening balance
Within 1 year 695,029,371.36 40,358,501.19
1 to 2 years
2 to 3 years
Over 3 years 3,002,821.17 4,502,821.17
Subtotal 698,032,192.53 44,861,322.36
308 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements (Cont’d)
1. Accounts receivable (Cont’d)
(2) Provision, recovery or reversal of bad debt provision for the period
Provision of bad debt provision for the period:
Unit: RMB
Changes in the period
Opening Closing Recovery or
Category balance balance Provision reversal Write-off Others
Bad debt
provision 5,656,652.36 5,516,556.84 7,977,577.91 3,195,631.29
Total 5,656,652.36 5,516,556.84 7,977,577.91 3,195,631.29
(3) Top five other receivables according to closing balance of debtors
The total amount of the Company’s top five accounts receivable based on closing balance of debtors for the
period was RMB696,640,739.26, which accounted for 99.80% of the closing balance of the total accounts
receivable. The closing balance of corresponding bad debt provision amounted to RMB3,106,147.59.
2. Bill receivable
Unit: RMB
Closing balance Open balance
Bill type Book balance Bad debt provision Book value Book balance Bad debt provision Book value
Bank acceptance bill 553,050,000.00 553,050,000.00 2,230,000,000.00 2,230,000,000.00
Commercial acceptance
draft 917,670,000.00 917,670,000.00 1,024,460,000.00 1,024,460,000.00
Total 1,470,720,000.00 1,470,720,000.00 3,254,460,000.00 3,254,460,000.00
2020 ANNUAL REPORT 309
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XVII. Major Item Notes of the Parent Company’s Financial Statements (Cont’d)
2. Bill receivable (Cont’d)
(1) Bills receivable endorsed or discounted at the end of the period but not yet due
Unit: RMB
Amount Amount not
derecognised derecognised
at the end of at the end of
Type the period the period
Bank acceptance bill 553,000,000.00
Commercial acceptance draft 917,670,000.00
Total 1,470,670,000.00
3. Other receivables
Unit: RMB
Item Closing balance Opening balance
Dividend receivables 200,000,000.00
Other receivables 10,437,425,503.02 13,975,590,537.58
Total 10,637,425,503.02 13,975,590,537.58
(1) Dividends receivable
1) Classification of dividends receivable
Unit: RMB
Item (or investee) Closing balance Opening balance
Shandong Chenming Group Finance Co., Ltd. 200,000,000.00
Total 200,000,000.00
310 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements (Cont’d)
3. Other receivables (Cont’d)
(2) Other receivables
1) Other payables by nature
Unit: RMB
Closing book Opening book
Nature balance balance
Open credit 10,482,693,848.05 14,082,545,251.05
Guarantee deposit 7,421,297.60 5,454,233.36
Advances 526,752.62
Insurance premium 291,708.31 13,979.13
Reserve and borrowings 6,971,976.60 8,089,922.34
Others 95,539,178.66 74,361,611.85
Total 10,592,918,009.22 14,170,991,750.35
2) Particulars of bad debt provision
Closing bad debt provision at phase 1:
Unit: RMB
Expected credit
loss rate (%)
Book for the next Bad debt Carrying
Category balance 12 months provision amount Reason
Bad debt provision assessed
individually
Interests receivable
Dividends receivable
Bad debt provision assessed
collectively 10,527,835,552.61 0.86% 90,410,049.59 10,437,425,503.02
Amount due from government
agencies 15,283,836.32 99.72% 15,241,735.75 42,100.57
Amount due from related parties 9,987,186,523.95 0.19% 19,038,071.05 9,968,148,452.90
Other receivables 525,365,192.34 10.68% 56,130,242.79 469,234,949.55
Total 10,527,835,552.61 0.86% 90,410,049.59 10,437,425,503.02
2020 ANNUAL REPORT 311
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XVII. Major Item Notes of the Parent Company’s Financial Statements (Cont’d)
3. Other receivables (Cont’d)
(2) Other receivables (Cont’d)
2) Particulars of bad debt provision (Cont’d)
As at the end of the period, closing bad debt provision at phase 3:
Unit: RMB
Expected credit
loss rate (%)
Book for the next Bad debt Carrying
Category balance 12 months provision amount Reason
Shouguang Paper Mill No.2 1,500,000.00 100.00% 1,500,000.00 Overdue for a
prolonged
period and
unlikely to be
recovered.
Arjo Wiggins Chenming Specialty 1,290,901.12 100.00% 1,290,901.12 Overdue for a
Paper Co., Ltd. prolonged
period and
unlikely to be
recovered.
71 entities including Qingdao 62,291,555.49 100.00% 62,291,555.49 Recovery
Jieneng Qilunji Group Co., Ltd. subject to
( uncertainties
)
Total 65,082,456.61 100.00% 65,082,456.61
Changes in carrying book balances with significant changes in loss provision for the period
Applicable √ Not applicable
Disclosed by ageing
Unit: RMB
Ageing Closing balance Opening balance
Within 1 year (including 1 year) 10,315,335,710.07 10,816,421,382.30
1-2 years 190,920,767.76 3,307,579,124.71
2-3 years 40,248,068.73 6,172,674.00
Over 3 years 46,413,462.66 40,818,569.34
Total 10,592,918,009.22 14,170,991,750.35
312 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements (Cont’d)
3. Other receivables (Cont’d)
(2) Other receivables (Cont’d)
3) Provision, recovery or reversal of bad debt provision for the period
Bad debt provision for the period:
Unit: RMB
Changes in the period
Recovery
Category Opening balance Provision or reversal Written off Others Closing balance
Bad debt provision 195,401,212.77 37,652,222.16 77,560,928.73 155,492,506.20
Total 195,401,212.77 37,652,222.16 77,560,928.73 155,492,506.20
4) Top five other receivables according to closing balance of debtors
The total amount of the Company’s top five accounts receivable based on closing balance of debtors for
the period was RMB6,707,802,935.77, which accounted for 63.32% of the closing balance of the total
accounts receivable. The closing balance of corresponding bad debt provision amounted to RMB0.00.
2020 ANNUAL REPORT 313
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XVII. Major Item Notes of the Parent Company’s Financial Statements (Cont’d)
4. Long-term equity investments
Unit: RMB
Closing balance Opening balance
Item Book balance Impairment provision Book value Book balance Impairment provision Book value
Investment in subsidiaries 21,845,592,649.90 21,845,592,649.90 23,275,652,649.90 23,275,652,649.90
Investment in joint ventures and
associates 352,509,931.98 5,994,545.96 346,515,386.02 360,122,213.93 5,994,545.96 354,127,667.97
Total 22,198,102,581.88 5,994,545.96 22,192,108,035.92 23,635,774,863.83 5,994,545.96 23,629,780,317.87
(1) Investment in subsidiaries
Unit: RMB
Change for the period
Closing balance
Opening balance Additional Withdrawn Impairment Closing balance of impairment
Investee (Book value) contribution contribution provision Others (Book value) provision
Chenming Paper Korea Co., Ltd. 6,143,400.00 6,143,400.00
Chenming GmbH 4,083,235.00 4,083,235.00
Shandong Chenming Paper Group (Fuyu) Sales Co., Ltd. 1,000,000.00 1,000,000.00
Hailaer Chenming Paper Co., Ltd. 12,000,000.00 12,000,000.00
Huanggang Chenming Pulp & Paper Co., Ltd. 2,250,000,000.00 50,000,000.00 2,300,000,000.00
Huanggang Chenming Arboriculture Development Co., Ltd. 70,000,000.00 70,000,000.00
Jilin Chenming Paper Co., Ltd. 1,501,350,000.00 1,501,350,000.00
Jinan Chenming Investment Management Co., Ltd. 100,000,000.00 100,000,000.00
Jiangxi Chenming Paper Co., Ltd. 822,867,646.40 822,867,646.40
Shandong Chenming Power Supply Holdings Co., Ltd. 157,810,117.43 157,810,117.43
Wuhan Chenming Hanyang Paper Holdings Co., Ltd. 264,493,210.21 264,493,210.21
Shandong Grand View Hotel Co., Ltd. 80,500,000.00 80,500,000.00
Zhanjiang Chenming Pulp & Paper Co., Ltd. 5,055,000,000.00 27,500,000.00 5,082,500,000.00
Shouguang Chenming Modern Logistic Co., Ltd. 10,000,000.00 10,000,000.00
Shouguang Chenming Art Paper Co., Ltd. 113,616,063.80 113,616,063.80
Shouguang Meilun Paper Co., Ltd. 4,449,441,979.31 4,449,441,979.31
Shouguang Shun Da Customs Declaration Co, Ltd. 1,500,000.00 1,500,000.00
Shandong Chenming Paper Sales Co., Ltd. 762,641,208.20 762,641,208.20
Shouguang Chenming Import and Export Trade Co., Ltd. 250,000,000.00 250,000,000.00
Shouguang Chenming Papermaking Machine Co., Ltd. 2,000,000.00 2,000,000.00
Shouguang Chenming Industrial Logistics Co., Ltd. 10,000,000.00 10,000,000.00
Shouguang Chenming Hongxin Packaging Co., Ltd. 3,730,000.00 3,730,000.00
Shandong Chenming Group Finance Co., Ltd. 4,000,000,000.00 4,000,000,000.00
Chenming Arboriculture Co., Ltd. 45,000,000.00 45,000,000.00
Shanghai Chenming Industry Co., Ltd. 3,000,000,000.00 3,000,000,000.00
Chenming (HK) Limited 118,067,989.55 118,067,989.55
Chenming Paper United States Co., Ltd. 6,407,800.00 6,407,800.00
Shandong Coated Paper Sales Co. Ltd. 20,000,000.00 20,000,000.00
Weifang Chenming Growth Driver Replacement Equity
Investment Fund Partnership (Limited Partnership) 158,000,000.00 4,790,000.00 162,790,000.00
Total 23,275,652,649.90 82,290,000.00 1,512,350,000.00 21,845,592,649.90
314 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements (Cont’d)
4. Long-term equity investments (Cont’d)
(2) Investment in associates and joint ventures
Unit: RMB
Change for the period
Investment gain
or l ss Adjustment of Distribution of
recognised other cash div dend Closing balance
Opening balance Addit onal Withdrawn under equity comprehensive Other change i or profit Impairment Closing balance of i pairment
Investee (book value) contribution contribution method i come equity i terest declared provis on Others (book value) provis on
I. Associates
Jiangxi Jiangbao Media Colour Printing Co. Ltd.
Zhuhai Dechen New Third Board Equity
Investment Fund Company (Lim ted
Partnership) 52,412,989.91 -11,330.29 52,401,659.62
Ningbo Kaichen Huamei Equity Investment Fund
Partnership (Lim ted Partnership) 199,528,847.52 -978,921.25 198,549,926.27
Chenming (Qingdao) Asset Management Co.,
Ltd. 8,669,491.17 5,060.01 8,674,551.18
Xuchang Chenming Paper Co., Ltd. 5,994,545.96
Subtotal 260,611,328.60 -985,191.53 259,626,137.07 5,994,545.96
II. Joint ventures
Shouguang Chenming Huisen New-style
Construction Materia s Co., Ltd. 3,789,667.61 2,356,074.42 1,200,000.00 4,945,742.03
Weifang Sime Darby West Port Co., Ltd. 89,726,671.76 -7,783,164.84 81,943,506.92
Subtotal 93,516,339.37 -5,427,090.42 1,200,000.00 86,889,248.95
Total 354,127,667.97 -6,412,281.95 1,200,000.00 346,515,386.02 5,994,545.96
2020 ANNUAL REPORT 315
XIII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements (Cont’d)
5. Revenue and operating costs
Unit: RMB
Amount for the period Amount for the prior period
Item Revenue Operating costs Revenue Operating costs
Principal activities 6,881,284,099.00 5,528,211,060.91 5,832,105,007.21 4,489,117,606.27
Other activities 1,628,789,694.88 1,370,949,760.15 1,082,049,793.98 994,302,334.92
Total 8,510,073,793.88 6,899,160,821.06 6,914,154,801.19 5,483,419,941.19
Information related to performance of contractual obligations:
The Group’s performance obligations of machine-made paper are usually fulfilled within one year. The Group adopted
advance receipts or provides accounting periods according to different customers. As the main responsible person,
the Group directly conducts sales, generally at the same time as the goods are delivered or the goods are delivered
to the destination designated by the customer, the control of the goods is transferred to the customer, and the Group
obtained the unconditional right to receive payment.
Information related to the transaction price allocated to residual performance obligations:
At the end of the Reporting Period, the amount of revenue where contracts were signed but unfulfilled or with
uncompleted performance obligation is RMB156,487,086.88, and RMB156,487,086.88 is expected to be recognised
in 2021.
316 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements (Cont’d)
6. Investment income
Unit: RMB
Amounts during Amounts during
Item the period the prior period
Income from long-term equity investments accounted for using the cost
method 604,220,123.68 1,085,829,000.00
Income from long-term equity investments accounted for using the
equity method -6,412,281.95 -11,142,579.41
Investment gain on disposal of long-term equity investments -249,714,762.64 277,000,000.00
Investment gain on disposal financial assets measured at fair value
through profit or loss 784,345.77
Total 348,093,079.09 1,352,470,766.36
2020 ANNUAL REPORT 317
XIII Financial Report
XIIX. Supplementary information
1. Breakdown of extraordinary gains or losses for the current period
√ Applicable Not applicable
Unit: RMB
Item Amount Remark
Profit or loss from disposal of non-current assets -51,477,216.37
Government grants (except for the government grants closely related
to the normal operation of the Company and granted constantly at
a fixed amount or quantity in accordance with a certain standard
based on state policies) accounted for in profit or loss for the
current period 943,720,129.34
Profit or loss from debt restructuring -14,942,498.74
Except for effective hedging business conducted in the ordinary
course of business of the Company, gain or loss arising from the
change in fair value of financial assets held for trading, derivative
financial assets, financial liabilities held for trading and derivative
financial liabilities, as well as investment gains from disposal
of financial assets held for trading, derivative financial assets,
financial liabilities held for trading, derivative financial liabilities
and other debt investments 21,166,216.02
Other gain or loss items within the definition of extraordinary gain or
loss 8,582,997.62
Other profit or loss items consistent with the definition of
extraordinary items
Losses from abnormal suspension of operation -24,567,901.71
Consumable biological assets subsequently measured at fair value -13,329,852.55
Less: Effect of income tax 120,949,832.54
Effect of minority interest 155,276,771.30
Total 592,925,269.77 –-
The Company defines non-recurring profit and loss according to the definition in Explanatory Announcement No.
1 on Information Disclosure of Companies Offering Their Securities to the Public – Non-recurring Profit and Loss
and classifies non-recurring profit and loss listed in Explanatory Announcement No. 1 on Information Disclosure of
Companies Offering Their Securities to the Public – Non-recurring Profit and Loss as nonrecurring profit and loss,
please explain the reason.
Applicable √ Not applicable
318 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XIIX. Supplementary information (Cont’d)
2. Return on net assets and earnings per share
Earnings per share
Rate of return on net assets
Profit for the reporting period on weighted average basis Basic (RMB per share) Diluted (RMB per share)
Net profit attributable to ordinary shareholders of the Company 5.84% 0.36 0.36
Net profit after extraordinary gains or losses attributable to ordinary
shareholders of the Company 2.50% 0.15 0.15
When calculating financial indicators such as earnings per share and rate of return on weighted average net assets,
the interest on Perpetual Bonds of RMB171,776,438.36, the dividends on Preference Shares of RMB387,101,073.42
declared to be distributed and the cash dividends of RMB116,679,908.80 attributable to the shareholders of restricted
shares expected to be unlocked in the future among the dividends distributed during the reporting period are
deducted.
3. Accounting data difference under accounting standard at home and abroad
(1) Differences of net profit and net assets disclosed in financial reports prepared under IAS and Chinese
accounting standards
Applicable √ Not applicable
(2) Differences of net profit and net assets disclosed in financial reports prepared under oversea and Chinese
accounting standards
Applicable √ Not applicable
2020 ANNUAL REPORT 319
XIV Documents Available for Inspection
I. The financial statements signed and sealed by the legal representative, financial representative and head of the financial
department of the Company;
II. The original copy of the auditor’s report which is sealed by the accounting firm and signed and sealed by the certified public
accountant;
III. The original copies of the documents and announcements of the Company disclosed in the designated newspaper and on
the website as approved by the CSRC during the reporting period;
IV. The annual report disclosed on the website of The Stock Exchange of Hong Kong Limited;
V. Other related information.
The Board of Shandong Chenming Paper Holdings Limited
25 March 2021
320 SHANDONG CHENMING PAPER HOLDINGS LIMITED
